Data General Makes Comeback
Returning to roots, company introduces minicomputers aimed at `open-systems' market
THE minicomputer hasn't died. It has just moved into a pizza box. At least that's what Data General Corporation is banking on. A year ago, DG looked like it was collapsing along with the market for minicomputers, the powerful but costly machines that had been the company's mainstay since 1968. The hot products in the 1980s were smaller, cheaper computers that offered increasingly high performance. DG lost money for five straight years and halved its payroll to about 9,000.
Now, after two profitable quarters in a row, the Westborough, Mass., company is poised for a phoenix-like revival - not by abandoning its old markets, but by ``returning to its roots,'' says David Card, an analyst with International Data Corporation, market researchers in Framingham, Mass.
In March, DG introduced two new models that do the work of a traditional minicomputer, but use one pizza-box-size circuit board instead of many. The machines are competitively priced, starting at $96,000. Equally important, they aim at a portion of the midrange market that is growing: ``open'' systems, which can be easily linked to other computers.
Formerly, DG and other minicomputer companies kept profit margins high by selling and servicing proprietary systems. But customers increasingly sought standardization so that different kinds of computers could work easily together.
``The open-systems market is very, very competitive,'' says Stephen Baxter, DG's vice president of corporate marketing.
So far, Data General's push into open systems appears successful. Sales of its Aviion line of computers, based on AT&T's version of the Unix operating system, have been growing steadily since its introduction in 1989.
Now, with the introduction of the midrange ``pizza box'' computers - the Aviion 7000 and 8000 models - the company has ``finally got a machine that fits into the traditional minicomputer class'' that it is used to selling, says Thomas Willmott, vice president of the Aberdeen Group, a Boston market-research company.
The market for midrange Unix computers will grow from $5 billion in 1990 to $7 billion in 1992, Mr. Willmott projects.
And unlike the market for personal computers and workstations, where well-established players are now in fierce price battles, there is no dominant seller in this market, Mr. Baxter says.
The new Aviion machines compete with systems from Sequent Computer Systems of Beaverton, Ore., and Pyramid Technology of Mountain View, Calif. Larger companies, such as Hewlett-Packard Company and Digital Equipment Corporation, may also enter the market, observers say.
``The competition is heating up,'' says analyst Card.
Meanwhile, demand for proprietary minicomputers is still shrinking at a rate of 15 to 25 percent a year, Willmott says. While DG continues to upgrade and service its proprietary Eclipse MV line, with an installed base of 40,000 machines, the company's future depends on its move into the open-systems arena.
Profit margins are lower for open systems than for proprietary ones, and the newer products bring less servicing revenues because they are more reliable, Willmott says. About a third of DG's $1.3 billion annual revenue currently comes from service.
Acknowledging the challenge, Baxter asks: ``How do you have value-added [products] in a `standards' world?''
With products such as the ``pizza box'' minicomputers introduced in March, DG hopes to carve out a slice of the market for high-performance Unix ``servers.'' Servers act as processing centers for networks of computers. Many servers have fairly simple functions such as storing files to which all the computers in a network have access.
High-performance servers, or ``superservers,'' involve the use of more memory, more input and output of information, more computations, and connections with more computers - say a network of 1,000 rather than 50.
The Aviion servers use ``multiprocessor'' circuit-board designs with more than one processor chip.
To succeed, Baxter says DG must improve sales and marketing, and not rest on strong engineering. ``There are no guarantees in our industry.''