When systems vendor Data General reported net profits of $28.1m for its 1996 financial year, the company’s chief executive, Ron Skates, might have been expected to show signs of elation. It was, after all, the company’s first annual profit in five years, and proof that a comprehensive and courageous overhaul of the once struggling company was finally starting to pay off. But Skates, with characteristic equanimity, was not inclined to indulge in premature celebrations. We have cleared the decks and we are back in the game, he said, but added a proviso: The real test for us will be in two quarters’ time when we will see if the strategy has worked. Since then, DG has turned in three quarters, and all of them have been strong. The third quarter’s results confirmed an upward trend: revenues up 21.1% at $391m, with net profit doubling to $14.7m. Skates is now allowing himself to celebrate a little, forecasting 1997 will be the best in DG’s 29 year history. The company’s mainstay products – the Aviion server family and Clariion disk drive family – continue to show encouraging rates of growth.
By Jessica Twentyman
Third quarter revenues for the Aviion server line were 17% higher than last time. Revenues for the Clariion storage line increased by 77%. But, the wait-and-see game is not over yet. Data General has yet to see the results of two largely untested lines of business, Numaliine and Thinliine, both launched in 1996. The Numaliine business unit is dedicated to the development of NUMA (non-uniform memory access) shared memory cluster computers, designed to extend the high-end of the Aviion server range for enterprise-wide computing. The NUMA Aviion servers were launched in June this year, with the boast that they are twice as fast and half the price of NUMA servers currently available from Sequent, the company’s arch-rival, and at present, the only other player in the NUMA market. Skates is bullish about the opportunity and is expecting brisk demand. Customers tell us ‘I like the idea, but show me one.’ The ‘show me one’ phase is now underway. Data General faces fierce competition from Sequent, which has progressed far more quickly with its NUMA strategy. DG’s NUMA servers are almost ready, but are nonetheless lagging Sequent by around nine months. According to Steve Wanless, senior marketing manager with the company, Sequent has to date sold in excess of 320 NUMA servers. Wanless contests claims that DG’s Numa Servers will be faster and cheaper than Sequent’s offerings. The architecture and components are basically the same. As for price, the guy with nothing to sell is always cheaper. Our pricing is structured as it is because we were the first to market. I believe Data General’s pricing will have to drift upwards in order to guarantee a reasonable profit margin. Winning the battle with NUMA will not necessarily guarantee profits. NUMA is a new technology, and seen by many as too specialist to be profitable, especially in the light of rapid performance improvements made to commodity servers based on Intel processors and running Microsoft’s Windows NT operating system (which DG also sells). Currently, NUMA machines only run the Unix operating system, and although both Data General and Sequent claim to have Windows NT running on NUMA in their laboratories, it will not be available from until early 1998 at the earliest. Microsoft has not yet made any commitment to NUMA, choosing instead to concentrate its efforts on the Wolfpack clustering initiative for scalable NT. Microsoft won’t back NUMA for a couple of years, admits Skates, although he argues that this will not have much impact on NUMA’s prospects. Wolfpack can’t match NUMA, he says, The two won’t compete. Data General is also harboring high hopes for its Thiinline division, a quasi start-up company established last year with a view to developing ‘thin server’ systems to provide support and servers to the emerging genre of ‘thin client/network computer’ devices. Thiinline is also running behind schedule, with products originally scheduled for launch in spring 1997 yet to materialize. The Thiin server is a device targeted at consumers and small businesses; it will act as a connectivity gateway and file server for groups of internet appliances such as laptops, PCs, and thin clients will now be launched at the end of this year while the information server – a single-function device which will reside at content-host sites and dispatch HTML pages – will be available later this month.
Outrageous price
Because of the delays, Thiinline now seems unlikely to achieve its goal of contributing $100m in revenues to DG by the end of 1997. Skates believes there will be immediate demand for Thiinline’s information server. People are already beating down our door, simply because of the outrageous price of most web servers. But the success of Thiinline depends very much on the uptake of thin client computing, as yet an immature and largely untested market. The home market could be important. Skates hints at a deal for the Thiin servers with a major US telco. The company is also seeking partners with strong distribution in consumer markets, such as cable companies and the regional telephone companies. Despite Data General’s remarkable return to strength, it remains, in revenue terms, a smaller company than it was in 1985. Having at last achieved some measure of stability, the company must now demonstrate the ability to foster unproven new products. We’ve already shown our survival instincts, says Skates.
