Ron Skates, president and chief executive of Data General Corp, and senior vice-president Tom West, were in the UK last week, ostensibly to bolster the company’s bid for a share of the UK Home Office’s Unix System Environment – House 2 – contract for open systems hardware, which is worth up to UKP100m split between […]
Ron Skates, president and chief executive of Data General Corp, and senior vice-president Tom West, were in the UK last week, ostensibly to bolster the company’s bid for a share of the UK Home Office’s Unix System Environment – House 2 – contract for open systems hardware, which is worth up to UKP100m split between three suppliers. House 2 is a project to computerise the UK’s criminal justice system. No word on who else is bidding: Skates says the contract isn’t extraordinarily special – the guy loves London and has used the visit as an excuse to bring his daughter over for a vacation. He will also be using the trip to meet customers and renew contacts. The General’s general is confident that, whatever its prospects may seem to outsiders, the fast-shrinking Westborough, Massachusetts hardware manufacturer will weather the economic storm, while competitors that haven’t been as prudent will suffer greatly or vanish altogether.
Axed by AViiON
Half the beast it used to be and back in the red at the mid-point of 1992, Data General will be lucky to break even this year, despite vast attempts over the last three years to clear the decks and keep a tight ship (CI No 1,806). But, although eyebrows were raised in April at the unexpected announcement that the company would be axing a further 1,000 jobs, reducing the total headcount to just over 7,000, from 17,700 a few years ago, Skates maintains that these cuts – 600 to 700 of which have already been effected – would have been implemented regardless of the company’s financial performance. It turns out that the recent redundancies were enabled by the installation of an AViiON-based Unix client-server administration system at the company’s headquarters. Skates, his ruthless beancounting skills surfacing, makes no bones about suggesting that if any more job cuts can be made, they will be. He explains that although it is currently incurring losses, the company’s balance sheet remains healthy in comparison with those of its rivals. And he notes that the General is selling more computers than ever before in our lives. But, although margins are good, system prices are much reduced, so that a very low cost base is needed before profits begin to show. The firm has over the last three to four years put a good deal of energy into reducing that cost base, but now, even with a quarterly breakeven level reduced to $270m from $350m, the company is struggling to make ends meet. The problem lies with the proprietary MV Eclipse line, which last year still accounted for some 65% of revenues. Skates says MV customers are in the main small businesses that aren’t making replacement purchases while the recession lingers on. So, although AViiON sales are increasing quarter by quarter, they aren’t bringing in enough to compensate for the sudden drop-off in MV business. Skates forecasts that it won’t be until early 1993 that sales of the Unix-based AViiON workstation and server line cross the proprietary MV minicomputer family.
By Sue Norris, William Fellows and John Abbott
(The research and development split between the two lines currently 50-50 – will soon tip the balance in favour of AViiON, since three years’ worth of products are expected to be squeezed out of the last round of investment in the proprietary line). While Skates concedes that the current year is going to be a difficult one, he feels that his company is now better prepared than most. In November, he warned that if the likes of IBM Corp and Digital Equipment Corp didn’t implement drastic measures they’d go through Holy Heck – the General has been through that and, if the company is confident about one thing, it is that the worst is over. Alliances beyond the product-swap level are seemingly still off the agenda, and Data General is not for sale. Nor does it appear that Skates has given any thought to a suggestion once made in Computergram, that Data General might benefit from taking over Motorola’s loss-making Computer Systems division, with Motorola in turn taking a sizable stake in the enlarged company. The General currently o
ffers 29 AViiON systems – seven workstations models, the rest server configurations built around Motorola Inc’s initial 88100 RISC part. Its top-end quad-processor was launched more than a year ago and there have been no major additions to the range since then. The company will move to the next-generation 88110 CPU – which it will use to re-vamp the entire AViiON line – though an eight-processor system using the existing 88100 will emerge before that, Skates says. Despite 88110 announcements from other Motorola RISC vendors – notably Dolphin Server Technology A/S and Harris Corp – Data General is not worried about rushing to follow suit. Skates doesn’t believe that anyone is actually shipping 88110 products yet in any case. He is also quite condemning about vendors that pre-announce products that aren’t going to be available until some time in the distant future – Data General, on the other hand, adheres strictly to a policy of not announcing anything that can’t be delivered within three months, Skates says. He acknowledges that DEC has approached the company – as it has most other manufacturers – about using its Alpha RISC processor. Skates describes Alpha as wonderful technology, but maintains that the 88000 is better (this is fast becoming a Data General company motto). Despite being Motorola’s only volume outlet for 88000-based CPU systems, the company wouldn’t dream, he says, of taking over fabrication of the part from its owner, in the way that Silicon Graphics Inc is swallowing its chip supplier. Apart from the fact that it divested its foundry business some four years ago – and has no intention of getting back into that game – Motorola can supply 88000s at a $850 apiece.
That’s a price Data General could never hope to match; indeed Motorola could probably fulfill DG’s entire CPU requirements for the part in just a straight two week run on its fab line, says Skates. In any case, a fabrication plant costs $1.3m a week to run before you even turn the lights on. Tom West, head of Data General’s Advanced Systems Development Group, claims that Data General’s lonely advocacy of the 88000 RISC is not a problem. Two or three years ago, he says, I was more worried about the decision than I am now. The challange to make the 88000-based systems a binary-compatible standard across a wide range of high-volume, multi-vendor systems has largely failed, despite the 88open binary compatibility standard, to which the General heavily contributed, serving as a model for how it should be done. The chip just has the wrong designer label, says West. But, he adds, most shrink-wrapped software wouldn’t be applicable to Data General’s demanding commercial customers anyway. Aside from the 88open work, West says that Motorola established an early working definition of the 88000 that won’t change with future upgrades. It’s also the best of the bunch for multi-processing, he notes. Although Data General has eight-processor models up its sleeve (as referred to above), the optimum for the AViiON’s tightly-coupled architecture is somewhere above eight and below 16, according to West. Ironically, when the Westborough company started with AViiON, the fashion was to get away from proprietary silicon onto merchant microprocessors. Now Hewlett-Packard Co, IBM and DEC are all back on the far side of the fence.