United States. Congress. Senate. Committee on the.

The Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) online

. (page 27 of 140)
Online LibraryUnited States. Congress. Senate. Committee on theThe Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) → online text (page 27 of 140)
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Inforex, Inc.
Informatics, Inc.
Information Magnetics Corp,
ITEL Corporation
Levin Computer Co.
Logicon Corporation
Memory Technology Inc.
Microdata Corp.
Mohawk Data Sciences
MRI Systems Corp.
Odec Computer Systems, Inc.
Palyn Associates, Inc.
Pertec Corporation
Randolph Computer,
Sanders Data Systems Inc.
Storage Technology Corp.
Tally Corporation.
Telex Corporation.
Terminal Data Corp.
Xytex Corporation.



5104



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5105

Attachment No. 3
Datamation — the Automatic Handling of Information

THE WEED out !

Still prognosticating a dim future for the staying power of computer manu-
facturers, a generous number of market analysts have gathered and garnished
their statistics with perfectly reasonable logic.

Their basic contention : although the market for hardware will continue to
prosper, it is clearly impossible for the present number of computer manufac-
turers (a) to survive the substantial investment required for advanced tech-
nology, particularly where there is no strong alternative market to absorb heavy
annual losses (i.e., t.v. sets or electric razors) ; (b) to maintain satisfactory field
support and software backup; (c) to mass produce medium and large scale sys-
tems, and finally (d) to compete with a large flock of comparable firm.s, all offer-
ing basically the same equipment for "a narrow, vertical market."

Their conclusion : "the weed out" will surely take place within a handful of
years with three or four firms dominating the field and the remainder (if they
insist on remaining) accepting a minute fraction of the market.

In support of their forecasts, market analysts have been confronted with one
irksome problem, namely, all visible evidence of late, has indicated they are dead
vjrong in both contention and conclusion.

Despite the fact that a number of forecasts have pointed to small companies
as the first to expire, it is precisely in this area where some of the real strengths
of the industry have appeared. Not only have these "weenies" persisted in selling
their machines, but they continue to announce new hardware of sizeable pro-
portions.

Perhaps the best example is Control Data Corp. with its 160A, 1604, soon-to-be-
announced 924 and Stretch-class 660. Packard Bell's Computer is another case in
point where rumor of corporate lack of optimism in its computer division will
find little support when PB announces its 350 late this Fall. Computer Control
Corp.'s forthcoming DDP and El-tronics' ALWAC IV, a solid state entry to be
ready next year, are further indications that the staying power of the small com-
pany is not to be underrated.

Having recently completed its 100th 7090 installation and with a flock of small
to medium-sized contenders rolling off its production lines, there is little doubt
that IBM will continue as the giant in the computer industry. But companies such
as RemRand, well-known for their ability to turn an advantage into a loss, have
shown promising signs of twisting the bit in the opposite direction. Surprises are
also forthcoming from RCA with research in high speed circuitry through diode
memory.

As for others : Burroughs is very much in the solid state field with the 5000,
270 and forthcoming announcement of the 260. Philco has stuck neatly to its 2000
series improving speeds with the 212. Advances in high speed tape units and mass
storage devices are also under development by Philco.

Sales of the Honeywell 400 have been excellent and FACT although embarras-
singly late, reportedly is now ready to fly on the 800. Some technological rabbits
may also be pulled out of General Electric's new Sunnyvale hat.

In general, the most pessimistic news for computing market analysts is the
obvious fact that within the last three years, no one has left the field. There are
of course, some trends which have influenced the health of the industry ; namely,
a tempering of the early fever of the sales pitch which could easily have driven
a company or two into trauma and ultimately out of the computing business.
Also, there is a muturing realization of the need for long term investment coupled
to a gradual shift in the purchase vs. rental balance providing smaller firms with
a more encouraging, earlier dollar return. Finally, the field itself has expanded
from what may have been a narrow, vertical base of a decade ago, to a rapidly
growing tree sprouting numerous horizontal branches such as process control,
real time control, and many new areas of general purpose application.

It would seem therefore, that "the weed out" is hardly a frightening prospect
except that as the prophecies do not bear fruit, the job security of the prophesiers
may be inversely effected.



5106

Attachment No. 4

Bendix Gives Up on Computers — Selling Its Computer Division to Control
Data Corp. Sale Price, According to a Preliminary Agreement, Is Under
$10-MiLLiON To Be Paid in Cash and Stock

Whenever a contender in the electronic computer business oashes in his chips —
as Bendix Corp. announced it was doing this week by selling the assets and
business of its Computer Div. to Control Data Corp. — the poker faces of the re-
maining contenders stiffen. They know that with another man dropping out, the
game may well get harder rather than easier. The game of Electronic Data
Processing — or EDP — is played with megabucks, and it's almost as fast as three-
card Monte.

THE LOSS

Most people in the industry believe that it cost Bendix as much as $30-million to
try its luck. But Bendix Pres. Malcolm P. Ferguson says that a $40-million
investment figure that has been circulating through the industry is extraordinar-
ily high. At this time, he refuses to say how much Bendix did invest in computers.
According to a preliminary agreement between Control Data Corp. and Bendix.
the purchase price for Bendix's computer division is under $10-million, to be
paid in stock and cash over a period of time.

If the loss is in that magnitude, it indicates that getting out of the game is
more costly than ever. Royal McBee Corp. and Underwood Corp., both of which
backed away from the table when the stakes started to skyrocket, figure they lost
about $8-million and $12-million, respectively.

STUBBORN optimism

Bendix's departure also has started speculation among the kibitzers that this
may be the beginning of a shakeout in the industry that will result in a sudden
rush of mergers or dropouts. But, even though few companies in the industry
have seen black ink on their books yet. a major shake-out or merger trend is
unlikely at this time. The remaining contenders in the business-scientific field —
International Business Machines ; Univac Div. of Sperry Rand ; Control Data
Corp. ; General Electric Co. ; Philco Corp., a subsidiary of Ford Motor Co. ; RCA ;
National Cash Register Co. ; Minneapolis-Honeywell Regulator Co. ; Burroughs
Corp. ; and Monroe Calculating Machine Co., a subsidiary of Litton Industries — all
feel stubbornly certain that it's in the cards that they'll be among the big winners.

Not a few of these companies have suffered shortages in working capital because
of the delayed return on leased equipment. But most console themselves with
the thought that they would be in the black if equipment out on rental were con-
sidered as sold. In other words, if they had sold their computers instead of rent-
ing them, they would be ahead of the game. Even if such rationalizations are not
the way the game is played according to the rule book, it helps morale.

EARLY starter

Although Bendix was one of the early computer manufacturers — it delivered
Its first G-15 computer to an oil company in 1955 — it never "had big ambitions in
business data processing," according to Ferguson. The G-15 computer is a rela-
tively small, electron-tube computer used primarily for engineering and scientific
calculations. About 270 of them have been sold since 1955.

In 1959. the company decided to build a transistorized computer slightly larger
than the G-15. It grew into a much larger system — the G-20 — a large-scale data
processor that can be used for both business and engineering. However, because
of its relatively limited marketing program, Bendix was unable to develop as
complete a line of software — programming packages for users — as its competi-
tors, and the G-20 sold slowly.

beginning of THE END

When Bendix failed to replace the G-15 with an equivalent transistorized com-
puter, its market position plummeted.

Last year, Ferguson announced that Bendix was giving up all attempts to get
into business data processing and would concentrate on engineering and scien-
tific markets only.



5107

NATURAL BUYER

When Bendix made the decision to withdraw, it didn't take long to find a
buyer. There are good reasons why CDC wanted it. The IMinneapolis company,
famous for being the only other profitable operation in the computer business
besides IBM — is strictly a computer specialist. And the Bendix line dovetails
nicely with its own.

Started by a group of engineers from UNIVAC in 1957, CDC's first product
was a large-scale solid-state computer, the 1604. This was delivered in 1959, and
43 of them are now in operation. Initially, the company's objective was to make
a fine computer and sell it to customers — universities and research laboratories —
who knew how to program it and would need a minimum of expensive program-
ming and training aids.

Generally, CDC has used a highly accurate marketing technique. It claims it
sells two out of every three customers to which it presents a systems proposal
(average cost— $20,000 a pitch).

GOOD FIT

Bendix fits right into CDC's future plans. The older tube-model G-15 is slightly
smaller than CDC's solid-state 160 computer. And since customers almost always
move up when they replace a computer, CDC will have a fine basis for upgrading
G-15 users to its own 160s. And the G-20 — the big Bendix unit — fills a niche
in Control Data's line of larger equipment, an extensive array that includes the
largest and fastest computer systems now made in the U.S.

Attachment No. 5A

Plaintiff's Exhibit 386-060

management committeie minutes

Present : Mr. W. C. Hume, Mr. D. R. McKay.

I. Hume and McKay discussed their impressions of the BEMA Business Show
in New York. Most major systems manufacturers did not demonstrate, the ex-
ception being CDC. A significant percentage of the exhibits involved copiers,
printers, and terminals.

II. Chien, Gore, and Andres entered. Chien reviewed some recent work he has
done on the NPII Model. While the original task was to cast light on the under-
lying causes of the 1970 poor performance, Chien believes that the work has
long-term ramifications as well. The model assumes that NPII depends on four
major factors — the economy, the product cycle, the announcement strategy, and
new market environment. The model itself deals mainly with the first three fac-
tors, acknowledging that items such as unbundling are at this point highly judg-
mental. The unbundling influence, however, has been added to the conclusions.
Historic : NPII has gone in cycles and although it can be broadly related to the
PBD index, it doesn't correlate on a year to year basis. Chien has concluded that
historic differences from the PED index are tied to product cycle and notes the
clear upturn at the time of first customer ship of the first, second, and third gen-
eration equipment. He theorizes that historically, we have clustered our first
cutsomer shipments, giving us first an acceleration stage as new applications
fill the quantum jump price/performance capability and then a deceleration stage
as we and the customer get more efficient in operating the newer equipment.
Chien's model indicates that we announced the 1401 a year too early and the /360
a year too late. He believes that we have not seen a comparable phenomena to
1970 in the past even though it was there because since 1958 there has never been
a dovetailing of a poor economy coupled with a deceleration stage in the product
line. He also concluded that product announcement and ship cycles have greater
impact on NPII than does the economy although the two are obviously inter-
active.

Looking forward, he concludes that the NS announcement strategy, based on
spaced announcements and first customer ship, will have the effect of slowing
down the acceleration stage, generating worse than anticipated in NPII in 1971,
'72, and '73 and with the availability of the complete product line in 1974
going well over normal expectations. Chien also concludes that there will be
no overcapacity in the marketplace for some time but that the key to expansion
is significantly increased by price/performance, i.e., supply creates its own
demand. Since the NS is not as dramatic a step forward as the /360 was, Chien



5108

concludes this will inhibit growth. If his theory is correct, the product cycle
will take effect with first customer-ships in 1971. However, the spreading an-
nouncement strategy will hurt comparative immediate revenue, although temper-
ing the cycle. Such a smoothing of growth, according to the model, can only be
achieved by less than desired revenue growth over the next several years. Lastly,
Chien is convinced that 1975 could be 1970 revisited, particularly if the economy
is not healthy at the same time. The MC noted that NPII and profits, while
related, are not at all the same.

The MC thought the work was very thought provoking and requested that
they get together with Chien again off-line after he has gone over his 1974-76
time frame conclusions with Beitzel.

(HI. All left and Piore, Baskin, Shapiro, and Bertram entered to cover the
Printing Strategy. Piore indicated that this is not a CTC-approved strategy
because of a number of issues which the CTC expects to resolve in some 60
days. Piore indicated that the printing area has some of the characteristics of
disks and tapes of three years ago. We are very strong in the marketplace and
we are continuing to use old technologies. Both Piore and Bertram believe that
the control unit for the printer will pose technical problems for competition,
but they feel that plug-to-plug printers could arrive in the marketplace shortly^.
Competition has recently made three announcements. Telex has purchased $25
million worth of CTC printers and it is possible that they will offer a printer
disk and tape package. If technology allows the introduction of a universal
controller over the plan period, it would result in a clustered self-contained I/O
subunit. Xerox has announced its intent to get into the computer printing busi-
ness using a nonimpact printer. A. B. Dick has announced and demonstrated
a non-impact printer using ink jet technology.

The MC reviewed a numher of promising products in the planned program
ranging from SPICA, a 15 character/second printer to ALTAIN, the new 1600
line/minute printer. All of these printers, however, are predicated on older
technology. The only printer presently involved in advanced technology is the
Jubilee which is a non-impact unit with an effective speed of some 3,000 lines per
minute. This printer is being developed in San Jose and is presently scheduled
for announcement iu 1972. Piore believed there is less than a 10% chance that
it will be available within a five year period. Bertram is somewhat more
optimistic but even Baskin acknowledged that there are significant technical
problems to be solved and insufficient resources devoted to the solutions.

The Science Advisory Board is meeting in Lexington next week to discuss the
best method of getting the Copier technology into the printer line. In the ink
jet area, all acknowledged we were well behind and in fact we've only recently
started an audit to see whether we have basic license and patent problems.

At the low end, the MC noted that high maintenance charges combined with
long life make it very difllcult to develop printers at a satisfactory profit. Hume
and McKay believe that the probable solution to this problem is planned price
increase and noted that Opel is examining this alternative in conjunction with
the KEEP Program.

Attachment No. 5B

Plaintiff's Exhibit 384B-016

Present : Mr. R. H, Bullen, Mr. G. E. Jones, and Mr. M. B. Smith.

I. Jones reviewed the key points covered in the DPD State of the Union Meas-
urement meeting as follows :

A. DPD feels undermanned in the sales area. Jones stated that Hubner felt
the training of DP personnel in BOA was a first priority for any additional
funding.

B. Product Marketing provides a heavy focus on product rather than on the
market. Jones stated he was not in agreement with the relative priorities.

II. Anderson, Spatz, Piore, Hume, and Knaplund entered for an informational
presentation on Integrated Circuits.

A. Spatz reviewed the historical background on circuits from tube to transistor
to SLT to integrated circuit chip. He stated the motivation for the trend was to
achieve lower cost, increase reliability, and improve performance. He stated that



5109

LSI is an extension of the historical trend. A primary difference between LSI
and circuit product technologies is that 100 or more circuits are contained on a
single semi-conductor chip versus 14 circuits on the most advanced integrated
circuit on any IBM announced product.

B. Spatz stated that for LSI to be used beneficially, its application must be
concentrated on circuit blocks having high usage with internal circuits and con-
nections and few external connections. He stated that memory is an ideal appli-
cation for these characteristics. Use for CPU logic offers substantially lower
opportunity for the future. He stated that Field Effect (IGFETS) integrated
circuits hold more potential for successful use than Bipolar integrated circuits.
The use of integrated circuits for logic was questionable. The primary advantage
of Field Effect over Bipolar was stated to be the ease of fabrication and higher
expected yields. The disadvantage is that Bipolar provides approximately two
to three times the speed of Field Effect systems.

Piore stated there was no firm agreement between all the interested parties in
IBM on whether Field Effect or Bipolar offered the best long-range potential.
His judgment was that we were two-three years behind competition in the Field
Effect area and that this technology would not appear in our machines before
1973 or 1974. He stated that we can match anyone in the industry on development
in the Bipolar area and that we intend to keep pressing that development effort
because of its good speed characteristics.

The MC agreed with Piore's recommendation that the CTC continue, as
planned, to review the resource allocations being made by CD to the Bipolar and
IGFETS areas and would report to the MC if necessary.

III. Hume, Opel, Kennard, Piore, Case, Gore and Knaplund entered for an
informational presentation on NS Series.

A. Jones questioned why the 3.7 card I/O equipment was not being planned
for use in the NS Series. Case responded that in the speed ranges required for
NS. the 80 column technology was easier to build at a given cost and that demand
for 80 column equipment in the speed ranges required is in the market today. He
did state the small card ultimately would be our thrust. Jones took exception
with this and stated he felt the small card technology should be used for NS.

IV. Simmons, Brown, and Hume entered for a presentation to approve a Real
Estate proposal to purchase the Phoenix Branch ofl3ce. Simmons .stated the
advantage of ownership in the program was $959,000 per year with a positive
cash flow of 13 years and a return of investment of 21.7%. After discussion, the
Real Estate proposal was approved.

V. Knaplund, Opel, and Phypers entered for a discussion of the format of
the MC presentation of the Corporate Strategic Plan to the MRC. After discus-
sion, it was agreed the format proposed by Knaplund was acceptable (attached)
and that Opel would develop the preambles to be given by the MC prior to
each divisional presentation to the MRC.

VI. Haskell and Phypers entered to present the details of the proposed Staff
Study.

A. The MC suggested that Moodie or Evans, or both, be added, and McCracken
eliminated, to the list of executives to be interviewed prior to the Idckoff of
the Staff Study. The remainder of the suggested Staff Study outline was approved
a.s presented.

B. Haskell reviewed the timetable for the Staff Study as follows :

1. June — review the Staff Study approach with the executives listed for
review and research past efforts of staff study work.

2. July — design questionnaires.

3. August — announce the study and begin data gathering.

4. September — analyze data.

5. October — distill and test the principles developed.

6. November — review with the MC/MRC.

After discussion, the MC agreed with the timetable as presented.
Meeting adjourned.



5110

Attachment No. 6
Plaintiff's Exhibit 128






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Online LibraryUnited States. Congress. Senate. Committee on theThe Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) → online text (page 27 of 140)