Hostile Takeover by AT&T in 1991The

Hostile Takeover by AT&T in 1991
Then NCR ran into a formidable adversary, the American Telephone & Telegraph Company
(AT&T). Seeking to bolster its failing computer division, AT&T issued a bid for NCR in
December 1990, placing the purchase price at $90 a share, or $6.1 billion. The bid was met
with instant hostility by NCR and over the next five months the tug-of-war was played out
in the media. NCR Chairman Charles Exley publicly expressed his disdain at the thought of
helping AT&T become profitable in the computer field and vowed to quit if the takeover
were successful. AT&T countered with a proxy fight to unseat the NCR board of directors.
Both sides hired high-powered advisers--takeover lawyer Martin Lipton and Chemical Bank
for AT&T, and investment bankers Goldman-Sachs for NCR.
NCR fought hard by taking out full-page newspaper advertisements to turn public opinion
its way and by asking the FCC to investigate AT&T's bid. In the end, AT&T agreed to pay the
$110 per share, or $7.4 billion, that NCR was demanding, stipulating, however, that
payment be made in AT&T stock. The merger was completed in September 1991. In July
NCR announced plans to create a new division to market computer products to telephone
companies. NCR's market position was slowed by the hostile takeover and subsequent
adjustment period. Exley retired in February 1992 and Gilbert Williamson, NCR president,
succeeded him as CEO. Elton White, executive vice-president, moved into the president's
spot.
Incorporating NCR, with its superior product development capabilities and focused
marketing plan, into AT&T, whose computer products were not as sophisticated but whose
market was universal, proved to be a challenging task. To counter the market drop, a
restructuring of NCR occurred almost immediately. In August 1992, even before the merger
was completed, plans to close NCR's Cambridge, Ohio plant were announced. In November
NCR's Workstation Products Division was split into smaller groups that would function as
independent corporations. A number of AT&T employees and products were moved into the
division at this time. That same month, AT&T announced that 120 workers would be
released from NCR's Network Products Division in St. Paul, Minnesota.
Despite the internal upheaval caused by the hostile takeover bid, NCR continued to develop
new products. A pen-based notepad computer, the NCR System 3125, was introduced in
June 1991. The computer was the first of its kind to use an electronic stylus instead of a
keyboard. The alliance with Teradata was solidified in December when NCR purchased the
company for $520 million in AT&T stock. Ironically, Teradata's biggest customer had been
AT&T.
In early 1993, after initially keeping a "hands-off" attitude toward NCR, AT&T installed one
of its executives, Jerre Stead, as NCR CEO. Stead's casual, "open-door" approach was one
that clashed with NCR's conservative corporate culture, and his desire to broaden NCR's
focus and step up the company's production of PCs was not popular in all quarters. In 1994
NCR also was renamed AT&T Global Information Solutions (GIS).
Under AT&T's management NCR/GIS was not performing up to par, however, and Stead
jumped ship in 1995. The company found a replacement in Lars Nyberg, a Swede who had
successfully turned around the fortunes of Philips Electronics N.V.'s computer division.
Nyberg immediately began to make serious changes, announcing a restructuring that
included the layoffs of 20 percent of the company's workforce. NCR was reportedly losing
almost $2 million a day for AT&T, and Nyberg also made the decision to get out of the PC
business, in which NCR seemed to have few prospects for long-term success. The company
also dropped the unpopular GIS name and became known as NCR once again.