EMC to buy Data General for $1.22 billion

Makers of corporate data storage systems will swap stock, debt

August 10, 1999|By BLOOMBERG NEWS

HOPKINTON, Mass. -- EMC Corp., the world's No. 1 maker of corporate computer-storage systems, agreed yesterday to buy rival Data General Corp. for about $1.22 billion in stock and assumed debt to add products for midsize businesses.

The company will exchange 0.3262 share for each Data General share, or $19.58, 48 percent more than Friday's close. EMC also will assume $212 million in debt of Westboro, Mass.-based Data General, which has had trouble making money.

The acquisition will help EMC boost sales to companies that want to do more business online but can't afford its top-of-the-line storage equipment. EMC has about 35 percent of storage sales to big companies, though rivals including Dell Computer Corp. and Compaq Computer Corp. are selling cheaper machines to target the $10 billion-a-year market for small and midsize companies.

"The midrange market has been an attractive place to be, especially to pick up the newer Internet companies," said Mark Kelleher, a Suntrust Equitable Securities analyst.

EMC shares yesterday fell $3 to $57. Data General rose $4.25 to $17.4375. EMC said it expects to take an unspecified charge when the acquisition closes before year's end.

Hopkinton-based EMC makes refrigerator-size machines that store large amounts of computer data.

The company had 1998 revenue of $3.97 billion and a profit of $793.4 million, compared with Data General's loss of $152.4 million with a restructuring charge on sales of $1.46 billion.

EMC also is one of the world's 25 largest software makers and charges a hefty premium for its programs and round-the-clock support.

Data General, an innovator during the early 1980s in the market for minicomputers designed to handle the tasks of big mainframes, was the subject of author Tracy Kidder's 1982 Pulitzer Prize-winning "The Soul of a New Machine." Later in the decade, though, the company missed the move to personal computers and servers.

After losses of almost $400 million in the 1990s and a greater emphasis on storage systems, it still wasn't able to compete with bigger rivals such as EMC.

Ronald Skates, Data General president and chief executive, said, "By going with EMC, our technology will get to market faster." Skates said he has no immediate plans except to aid in the union of the two companies.

Data General revamped its data-storage business last year and fired workers after a string of disappointing earnings.

The acquisition caps speculation about Data General, which was founded in 1968 and came close to bankruptcy four years ago. The purchase gives EMC Data General's Clariion storage devices, which are expected to boost sales to Internet-based companies as use of the Internet grows.

EMC said eight of the 10 biggest Internet service providers, 17 of the top 20 Internet revenue generators and eight of the top 10 Internet services already use its products. Customers include Amazon.com Inc., Cisco Systems Inc. and America Online Inc.

EMC said it has no plans to cut jobs at Data General, which already had gone through a restructuring, and because there about 1,500 job openings at EMC. "We can absorb the workers," said Gil Press, EMC director of corporate information.

Pub Date: 8/10/99

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