AT&T and NCR: a Merger That's Working

The challenge is for the two businesses to stay focused while gaining from having larger shared resources

MARRIAGES of the corporate kind do not excite poets. But the one between AT&T and NCR deserves some kind of paean. In a high-tech world where most mergers flop, this one has worked.

AT&T and NCR are beginning to show how communications and computers can live - and even thrive - under one roof. The experience gained here will prove valuable as AT&T moves to merge McCaw Cellular into its corporate fold. Maybe synergy - the buzzword that soured along with so many highly touted ``synergistic'' partnerships - can work after all. Some analysts say that AT&T-NCR can redefine the telecommunications and computing industries.

``Our call for the early leader in this stuff is AT&T,'' says Neal Hill, a senior analyst at Forrester Research Inc. in Cambridge, Mass. ``They have all the pieces in rudimentary form.'' The challenge is to connect them. Building on NCR's past

Dayton, Ohio, is a modest Midwestern town that invented cash registers, not computers. Ever since John H. Patterson founded National Cash Register in 1884, the company has stuck to those roots: financial transactions. NCR began to computerize its products in the 1960s when it became clear that electronics was the wave of the future. Buy a candy bar or a pair of pants today and chances are an NCR terminal likely handled the transaction. Withdraw money from an automated teller machine (ATM) and it is possible that NCR made the machine.

It is this computer niche - the know-how of capturing and transmitting financial transactions - that attracted AT&T Chairman Bob Allen to bid for the company nearly three years ago.

It was a tempestuous courtship. NCR chairman Charles Exley Jr. fought the takeover and only relented when AT&T upped its bid. Yet by most accounts, the merger has been smooth due to several factors. ``A lot of things people did in the '80s proved that financial synergy didn't work very well,'' says Philip Neches, NCR's chief scientist. The classic example was the combination of Sperry and Burroughs in 1986 to form Unisys Corporation. For several years the company tried to market both of its incompatible computer lines, with disastrous consequences.

NCR and AT&T did not have that problem. They were using the same version of a computer operating software known as Unix. Both were committed to open systems where machines from different manufacturers can interoperate. And both had begun to emphasize Intel computer chips over rival architectures.

Another reason for the merger's success was the quickness with which the two companies came up with a plan. Two days after the merger was announced, Dr. Neches and Bill O'Shea of AT&T formed a team to combine the pieces and products. In just 16 days, they had a plan. What made the planning easy, Neches says, is what he calls the two companies' ``strong value-based guidelines that made a lot of the decisions straightforward.''

For example, the two companies carefully planned the human side of the equation. Employees of AT&T's computer unit were given a choice of finding a new position within AT&T or transferring to NCR. If they decided to transfer, NCR actively ``recruited'' them.

``Most of our time in the infamous summer of '91 was spent on people-related issues,'' says Angie McGuire, who transferred from AT&T's computer division to become NCR's marketing vice president of enterprise systems. ``The thing that sticks in my mind was the people resources'' AT&T committed to handle the displaced workers.

Perhaps most important, AT&T let NCR be NCR. Although Mr. Exley left as he said he would, the company's No. 2 man, Gilbert Williamson stayed on as chairman. When Mr. Williamson retired last May, AT&T's Mr. Allen tapped another AT&T newcomer, Jerre Stead. Mr. Stead, former chairman of the industrial control and electrical distribution company Square D, had only been with AT&T 16 months. ``Had a person come with 20 years at AT&T, it would have been a lot higher risk,'' Mr. Stead says. With him, NCR employees did not have to fear that AT&T was taking over. ``I'm seen as an outsider.''

There is only one hitch with this two-year-old marriage. AT&T has taken such a hands-off approach with NCR that the latter's weaknesses have been allowed to continue. Although NCR is a giant computer firm marketing some of the most exciting video-networking and other technology today, it is almost invisible in the computer marketplace.

Mr. Hill recalls meeting with NCR executives this summer. ``They do have a great story to tell,'' he says. But ``by the time we finished lunch I had to ask them: `How come I never hear of you? You guys just aren't on the view screen.' ''

It is a common observation within the computer industry.

``I can't honestly say that's a company that we come up against day to day,'' says Dave Cassano, an IBM vice president. ``We just don't see them actively.''

The result: NCR is having to scratch for customers through direct marketing. Fixing the problem will require changing NCR's stodgy, inward-looking culture. ``What we're doing is creating a company that's `outside-in' rather than `inside-out,'' Stead says. Learning teamwork

There is another challenge. If AT&T wants NCR to take advantage of its resources, NCR employees will have to know what is available. But even with the AT&T people aboard, less than 5 percent of the NCR work force has any experience working with the parent company. Stead says the company needs to build ``human bridges'' by transferring people from one company to the other.

AT&T's Mr. O'Shea calls this phase the third wave of the merger. ``Had we tried to do this too early in the merger, we would have been in trouble,'' he says. The challenge pervades all of AT&T, he adds. How can the company keep its business units entrepreneurial and autonomous and still reap the rewards of collaboration among them?

AT&T is trying to create teams from different parts of AT&T to collaborate and take responsibility for projects around six technologies: voice processing, data communications, scalable computing, visual communications, messaging, and wireless communications. ``It's a bigger challenge'' than the merger, O'Shea says, because the potential is so much greater. ``We see a lot of it in this convergence of computing and communications - entertainment and telephony and computing.'' That means building and marketing products and services for an industry that really does not exist yet.

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