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Will At&T Win `The Baldridge Award For Quality In Mergers'?


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WILL AT&T WIN `THE BALDRIDGE AWARD FOR QUALITY IN MERGERS'?

Charles E. Exley Jr., chairman of NCR Corp., professes bewilder ment. Why does a communications company like American Telephone & Telegraph Co. so badly want to buy a computer company like NCR? True, he admits, phone networks carry a lot of computer traffic. But, he says, "that's like an electric utility saying that because I deliver power to the outlet, I should be in the Mixmaster business."

AT&T executives are tired of hearing that kind of skepticism. They're out to show that AT&T isn't buying NCR just to bail out its own money-losing computer business--that there really is substance to AT&T's vision of a marriage between computers and communications. As AT&T Chairman Robert E. Allen told 1,200 customers on Apr. 24: "Our intent is to equip AT&T to ride the wave of networked computing that's growing three times faster than the computer business as a whole."

He even offered a sweetener to get the chance to prove his point. On Apr. 20, Allen offered to meet NCR's asking price of $110 a share in AT&T stock, or $7.4 billion. The biggest stumbling block left was discord over how much protection to give NCR shareholders against a decline in AT&T stock.

AT&T wasn't waiting for the deal to fall into place to pursue its vision. A transition team had already brainstormed 50 ideas for collaborative products and services, ranging from automated teller machines that understand speech to a system for clearing checks by phone instead of by the truckload.

Yet even if collaboration makes sense, AT&T still has to improve on its rather spotty record in strategic alliances (table). Moreover, the company has to show that collaboration is best done by acquisition rather than by cheaper means. MCI Communications Corp., AT&T's nearest long-distance rival, is an instructive contrast. Rather than acquire major equipment suppliers, which it couldn't afford anyway, MCI has formed close development and marketing relationships with such key players as Racal-Milgo, a Sunrise (Fla.) maker of data communications gear. Racal-Milgo President James K. Norman says because neither company owns the other, they both gain credibility when they pitch each other's products: "Anytime you own a company and you propose both products, it's viewed that you have an ax to grind," he says.

AT&T's answer is that its ambitions go beyond joint marketing and minor cooperation on product design. To make a real difference in global markets, says C. K. Prahalad, the University of Michigan corporate strategy guru who's advising AT&T, "you need free movement of technology and market knowhow. That can be done only when you create one organization, without any concerns about intellectual property and with broadly coordinated strategies."

GRAVY. One thing in AT&T's favor is that there's no urgency about producing the fruits of collaboration. Analyst Frank Governali of First Boston Corp. calculates that as long as AT&T's stock price doesn't sag too low, increasing the deal's cost, AT&T's earnings would keep growing if it merely keeps NCR's earnings on their upward trajectory and wipes out its own computer losses, estimated at more than $200 million a year. Any synergies, he says, would be gravy.

Wisely, AT&T senior managers vow they won't become synergy zealots. AT&T intends to assign gatekeepers to keep its own bureaucratic armies from unintentionally smothering NCR with forms, meetings, and corporate ritual. And a senior AT&T executive will be assigned to listen to NCR's people full-time and to report back. Sensitivity is in, conquest out. Says AT&T Data Systems Group Executive Robert M. Kavner: "We are interested in winning the Baldrige Award for quality in mergers."

Whether Exley knew it or not when he brought up Mixmasters, nothing irritates AT&T executives more than being compared to a utility. AT&T is out to prove with its acquisition of NCR that its days of supplying a regulated, generic commodity are long gone.

AT&T'S MIXED RESULTS WITH MERGERS AND JOINT VENTURES

1983

Forms European joint venture with Philips in phone-equipment manufacturing

OUTCOME Philips sells out, and AT&T finds new partners

1984

Buys 25% stake in Olivetti to cement a cross-marketing deal

OUTCOME Deal dissolves in 1989

1988

Agrees to buy up to 20% of Sun Microsystems

OUTCOME A joint effort to seize leadership in Unix software stirs industry resentment

1989

Buys Istel, a British data services company, and Paradyne, U.S. maker of communications gear

OUTCOME The deals are modestly successful

1991

Agrees with Japan's NEC to share basic semiconductor-manufacturing technology

OUTCOME Too soon to determine

DATA: BWPeter Coy in New York


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