Six European Computer Makers Reach Accord Aimed at Competing With IBM

By George Anders and Richard L. Hudson
The Wall Street Journal

February 19, 1985

LONDON -- European computer makers took a step forward in their efforts to compete with International Business Machines Corp., but they may lose ground anyway.

The six leading European minicomputer makers yesterday announced plans to standardize much of their minicomputer software, ending more than a decade of market fragmentation. The accord links Groupe Bull of France, ICL PLC of Britain, Siemens AG and Nixdorf Computer AG of West Germany, Ing. C. Olivetti & Co. of Italy and N.V. Philips of the Netherlands.

The agreement could "add more credibility" to European efforts to lure customers away from IBM, said Gilles Moutet, a Paris-based computer consultant for SRI International Inc. Under the accord, all six companies will develop software that can be run on a derivative of the Unix operating system developed by American Telephone & Telegraph Co.

But in the multibillion-dollar mainframe computer market, Europe's campaign to force IBM to disclose more about its new machines appears ready to backfire. Under an antitrust settlement reached last summer with the Common Market's Executive Commission, IBM must disclose technical details by mid-June about its planned Sierra series of mainframes. (IBM announced the Sierra series last week in the U.S., but doesn't intend to start shipping the computers until at least late 1985.)

Industry watchers say European companies will gain little from any Sierra disclosures. "There isn't a real European challenger at the top end of the market," according to Adrian Norman, a London-based computer consultant for Arthur D. Little Inc. Instead, European units of Japanese and U.S. competitors are expected to make the most use of any IBM disclosures about the new mainframes.

"When IBM makes any disclosures, we will take note of them," said an official at Sperry Ltd., the British subsidiary of U.S. computer maker Sperry Corp. Analysts said other likely Sierra-watchers will be Amdahl Corp. of Sunnyvale, Calif.; Control Data Corp. of Minneapolis, Minn., and Fujitsu Ltd. of Japan, all of which have European operations. An ICL spokesman said further details about the Sierra would be of "limited value" to his British company.

IBM's European sales, which totaled nearly $12 billion last year, dwarf its local competition. Mackintosh International Ltd., a British research group, has estimated that IBM's European sales are more than five times its nearest rival, Bull. IBM's European sales figures include African and Mideast business, but this is relatively minimal.

Analysts consider the accord among the six computer makers as essential for European manufacturers to battle IBM's market dominance. Currently, each of the six minicomputer makers has different operating systems, which control the way their machines execute programs.

As a consequence, programs for each brand of machine have to be written differently and aren't interchangeable, limiting the amount of available software. That means European buyers have hesitated to move away from the market leaders in minicomputers: IBM and Digital Equipment Corp. of Maynard, Mass.

In talks initiated a few months ago by ICL, the European producers reasoned that adopting the same operating system would help combat this problem. Under yesterday's agreement, the companies said, the manufacturers agreed to work together to develop the new AT&T-derived operating system and coordinate their efforts to write common software for it. Bull and ICL spokesmen said the companies currently are discussing the venture with AT&T and don't expect any obstacles.

However, Mr. Moutet, the SRI International consultant, warned that cultural differences in joint projects often slow down work, and unexpected technical difficulties can arise. "I'm not convinced it will work," he said, "but if you don't do something (to compete with IBM) you will be wiped out."

A Bull spokesman said the new systems will be introduced "little by little" in coming months. He said the companies don't intend to stop making machines with their own system.

As for the antitrust accord, IBM in Paris said it hasn't received any requests yet for more details on the Sierra machines. Even the European Community appears to have scaled back its hopes. In Brussels, Belgium, Colin Overbury, head of the EC's computer competition division, said, "It may be that at this stage, the IBM undertaking (to disclose more information) isn't very useful."

Copyright (c) 1985, Dow Jones & Co., Inc.