Data General Corp, recently hosting journalists at its Westboro, Massachusetts headquarters (see page 2), spoke more frankly about its financial situation than ever before. Reporting annual and quarterly breakeven levels is practically unheard of, yet DG revealed that at the end of the last decade it would have had to generate $350m revenues per quarter just to keep out of the red. Of course the company then couldn’t keep afloat, and was churning over ever-increasing operating losses. Three years and $265m restructuring costs later and the company is finally back in the black, reporting earlier this month (CI No 1,793) fourth quarter net profits of $18m, against $89m losses, on sales down 4% at $296m, and 1991 full-year net profits of $86m, against $140m losses, on turnover up 1% at $1,229m. The breakeven level, now, is down to $270m revenues per quarter, or $1,100m annually. Headcount has been more than halved, to 8,300, since the late 1980s and the number of manufacturing plants has been cut to five from 11. DG president and chief executive Ron Skates said we took our company and cut it in half, and went on to predict that the likes of IBM, Bull, Unisys and Prime were going to implement similarly drastic measures or else go through Holy Heck, if they weren’t already. Data General’s product costs last year accounted for 33% of each revenue dollar, down from 35% in fiscal 1990; service costs for 20%, down from 22%; research and development costs for 8%, down from 12%; and sales, administration and general costs for 31%, down from 37%. As a result, DG this time upheld a trading profit of $83m, or 7% of revenues, against a $133m trading loss in the previous year. And, whereas in 1990 DG saw a 29% negative return on equity, the company managed an impressive turnaround to a 19% positive return last year – all this while Sequent went from a positive return of 14% on equity to a negative of 27%; MIPS from a 7% positive return to a 26% negative; and DEC from a 1% negative to an 8% negative return. Data General’s quarter four balance sheet is pretty healthy too – total assets are up 4% at $944m. Long-term debt is up 190% at $165m. In 1988, before the turnaround really began, DG had $141m cash and $120m total debt; now the company has $241 cash and $173m debt. Europe now accounts for 35% of DG’s business – the US produces 55% and the rest of the world 10%. Skates’ comment on the European contribution was simply that he wants more. Equipment revenues, which account for two-thirds of total turnover are split roughly 65% from the proprietary MV Eclipse, 20% from AViiON, and 20% from personal computers, which are bought OEM and rebadged for that total solution. The balance of sales is made up of service revenues. When DG launched the AViiON range, MV revenues declined through lack of user confidence, but this has picked up with the introduction last year of four new midrange MV systems, says vice president of the Eclipse Business Unit Joel Schwartz; some 65% of MV business is in the mid range. And the MV range generated more than $100m in new business in 1991, 50% of which was through value-added resellers to new customers, based on DG’s CEO office software. AViiON sales, as we know ( CI No 1,794), doubled to $200m. Some 65% to 75% of AViiON sales are server-based. Aimed at the health care market, the public sector, manufacturing and distribution, the Data General Unix box claims 4.2% of the $8,000m RISC multi-user market, behind Hewlett-Packard, DEC and Sun, and running parallel with Pyramid. Sue Norris
