Is AT&T Able to 'Win the Peace'?

IF American Telephone & Telegraph Company manages to take over NCR Corporation, it faces the even bigger challenge of making the takeover work. "It makes an enormous amount of sense that AT&T wants to do this," says Kathryn Rudie Harrigan, director of the Strategy Research Center at Columbia University. But "I can only assume that this is going to be a nightmare."

Most takeovers are difficult. They usually involve merging different strategies and different corporate cultures. Many experts say high-technology takeovers are especially hard.

"The problem indeed is tougher in a high-tech environment," says Henry Riggs, president of Harvey Mudd College and author of a book on high-tech management. "Timing is everything in a fast-moving industry like computers."

People problems crop up too. Computer specialists can be fiercely possessive about projects, professor Harrigan says. Cancel the project or make them unhappy, and the brightest employees simply leave.

Recent history is littered with examples of high-tech acquisitions and mergers that didn't work out: Unisys (a combination of Sperry and Burroughs), IBM's takeover of Rolm, and Kodak's acquisition of Atex. AT&T's own investment in Olivetti didn't provide the success in Europe that AT&T had hoped.

Now AT&T is trying again. It hopes to revamp its own flagging computer line by acquiring NCR, the fifth-largest computermaker in the United States.

NCR has tried to stave off a takeover since AT&T announced its $90-a-share bid for the company in December. It took out huge ads urging stockholders not to sell their shares to AT&T. It started a new employee stock plan to make a takeover more expensive. It tried to get the Federal Communications Commission (FCC) to investigate whether an AT&T takeover was legal.

These defenses failed. The FCC refused to look into the takeover. A federal judge struck down the stock plan. At NCR's annual meeting Thursday in Dayton, Ohio, AT&T won a majority of shareholders' votes, according to preliminary results. AT&T appears poised to replace four - but not all - of NCR's 12 directors.

NCR could still emerge as an independent company, but pressures are mounting for a sale. The day of the annual meeting, NCR announced for the first time its official asking price - $110 per share. AT&T had said it would pay $100 a share if NCR allowed a friendly takeover. Both companies have indicated that talks would continue this week.

As an AT&T takeover looks increasingly likely, the telecommunications giant is preparing for how it will handle the company once it acquires it.

"It has the potential of being a brilliant merger," says Jon Goodman, director of the entrepreneurial program at the University of Southern California. "Whether or not it works depends on how good the managers are."

A successful takeover would be something of a first in the computer industry, acknowledges William O'Shea, AT&T's vice president in charge of marketing and development of computer lines. He says the takeover should show some results within 18 months in terms of new products.

AT&T is interested in NCR for several marketing and product reasons. NCR has a strong computer presence in Europe and Japan, which AT&T lacks. Both companies have embraced the concept of "open systems," which would allow all varieties of computers to be linked together.

What AT&T wants to build is a company that can handle electronic transactions from end-to-end. NCR makes machines that handle those transactions in two important industries: automated teller machines for banks and point-of-sale terminals for retail stores. AT&T's telephone network carries many of those electronic transactions and AT&T has developed considerable expertise in networking the machines that send and receive such data.

From a marketing standpoint, NCR has developed a reputation for customer service that AT&T's computer division lacks.

"They [AT&T] never were able to help or make us happy," says one Los Angeles-area vendor who sells AT&T and NCR computers. "Their flexibility is almost nil."

The biggest challenge will be integrating the people of both organizations, takeover researchers say. If an AT&T-owned NCR a year from now still retains 75 percent of its current staff, that would suggest AT&T was doing things right, Harrigan says.