Customers have doubts--and suggestions--about proposed AT&T-NCR merger

December 09, 1990|By New York Times News Service

Whether or not NCR Corp. remains independent, its managers -- a year or 10 years from now -- will be trying to sell computers to executives such as David V. Evans at J.C. Penney Co. Inc.

American Telephone and Telegraph Co., which is making a $6 billion hostile takeover bid for NCR, is particularly covetous of the computer-maker's hold on banks and retailers like J.C. Penney, where Mr. Evans is vice president of information systems.

Though a merger has been widely criticized by industry analysts as unnecessary, Mr. Evans and other customers offer some ideas of how the combined companies might fit together.

For three-quarters of a century, the J.C. Penney department store chain has been ringing up sales on devices from NCR, formerly known as National Cash Register.

J.C. Penney buys its computerized cash registers and personal computers from NCR and relies mostly on AT&T's long-distance network to link them.

Mr. Evans is reasonably satisfied with that state of affairs and is

doubtful that any new or useful products and services would emerge soon as the direct result of a merger.

"I'm not sure there's anything in particular that the end-users are not receiving these days," Mr. Evans said. "Who or whether we buy the transport of the data from is different from who or whether we buy the processing from."

Yet Mr. Evans finds it logical that AT&T should eventually expand into computer processing, given that industry's dependence on telecommunications.

"Basically what you have is a reasonably successful $6 billion starter kit," he said.

What is surprising is that the view of Mr. Evans and other customers of both companies tends to reflect AT&T's.

NCR, if acquired, is not likely to help AT&T's main businesses directly for some years, according to that view. Indeed, AT&T has remarkably few concrete plans for NCR.

NCR managers could yet find a way to prevent a takeover by finding a friendly buyer or organizing their own buyout.

"Only someone who doesn't understand the business and technology would think" NCR is compatiblewith AT&T, said Charles E. Exley Jr., chairman and chief executive officer of NCR.

Some industry experts contend that AT&T's main goal is actually to find new bosses for its own struggling computer business.

The deal "makes sense if you're getting rid of a money-losing operation, but it would be cheaper shutting it down" and leaving the computer business, said Fritz W. Ringling, a New York telecommunications consultant. "But that would be admitting failure."

AT&T managers are indeed beseeching their widely admired NCR counterparts to agree to a merger and then take over responsibility for AT&T's computer unit.

They have been reluctant to suggest their own post-merger plans, lest they influence NCR's management.

"AT&T cannot and should not do the planning of the integration until we do that collaboratively with the NCR management," said Robert M. Kavner, head of AT&T's computer operations and architect of the takeover bid.

The computer unit has not been a failure, he said, and recently won several large contracts.

Mr. Kavner said that in the long run, both companies would benefit from shared access to research by Bell Laboratories, AT&T's research arm.

NCR cannot afford to do much of this kind of research on its own. AT&T could generate more profits by using NCR to turn research into products than by licensing Bell Labs' discoveries, Mr. Kavner said.

NCR counters that if there were such an advantage it should have been apparent in the results of AT&T's computer unit.

In contrast to J.C. Penney's Mr.Evans, some communications managers do see ways in which AT&T could improve NCR immediately and reap quick benefits.

NCR has a contract to maintain ticket machines for Amtrak and has sometimes been slow in repairing them, said Norris W. Overton, Amtrak's vice president for information systems. NCR said it had a good service record on the contract.

AT&T, from which Amtrak recently bought $14 million worth of personal computers, has responded much faster to maintenance problems and might be able to teach NCR something, Mr. Overton said.

Another customer, Arthur M. Telchin, the director of information systems at Rogers & Wells, a New York law firm, said AT&T needs to expand its computer business to keep clients from defecting to rivals with wider product ranges and better customer support.

His firm recently replaced its AT&T personal computers with another brand for just such reasons, he said, adding, "we didn't want to be out on a limb."

But AT&T has given surprisingly little consideration to other aspects of how its divisions might fit with NCR.

For example, a strategic planning manager in AT&T's manufacturing unit for telephone company switching and transmission equipment said no study had been done of whether these highly computerized devices could use NCR equipment.

Mr. Kavner said AT&T was not relying on possible gains in long-distance traffic to justify the merger.

For antitrust reasons, AT&T is forbidden to sell telecommunications equipment and long-distance services in the same contract.

Nearly three-fifths of NCR's sales come from overseas. Some industry experts have pointed to these customer relationships as a way for AT&T to build its international sales.

NCR's sales force knows little about communications gear such as corporate switchboards and tends to deal with computer buyers rather than telephone-system buyers.

While both have emphasized linking desktop computers with a more powerful computer that moves information among them and does some data processing, their systems use different underlying software systems.

"There's not only no synergy, there's a direct contradiction," said NCR's Mr. Exley.

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