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Control Data To Convert Disk Drive Operations Into Separate Subsidiary

July 7, 1988

BLOOMINGTON, Minn. (AP) _ Control Data Corp. will convert its disk drive operations into a separate subsidiary, a possible prelude to a sale or partnership for the billion-dollar unit.

Analysts said the reorganization would make it possible for Control Data to attract a joint-venture partner or a buyer for the unit, which accounted for nearly $1 billion of the company’s $3 billion in revenue last year.

Disk drives are devices used for storing and retrieving computerized information at high speed.

Louis Lundberg, a company spokesman, said creation of the subsidiary ″will enable Control Data to explore the full spectrum of opportunities for data storage products in the future. Those include joint venture, partnership, acquisition or divestiture.″

Lundberg on Wednesday confirmed the contents of a June 29 memo from Lawrence Perlman, a Control Data executive vice president and president of the data storage products group.

Lundberg said Control Data had not planned to announce the move because it was ″an internal reorganization.″ In addition to the memo, the creation of the subsidiary was disclosed in the July 1 issue of Current, an internal Control Data publication.

Subsidiary status also will make the disk drive operations more competitive and free Control Data’s financial resources for use in other areas, he said, but he provided no details.

William Easterbrook, an analyst for Kidder, Peabody & Co. Inc. in San Francisco, said, ″It would be easier to sell a subsidiary. A buyer can more easily see separate books, separate profit-and-loss statements, that are not so meshed-in with the rest of Control Data ... It makes it easier for him to think of a price,″ he said.

Gary Smaby, an analyst for Needham & Co. Inc. in Minneapolis, said, ″The strategy has been set in motion that could lead to the spinning out, refinancing or restructuring of that business″ within the next two years.

In the refinancing area, the subsidiary might raise additional capital through the sale of stock, Smaby said. ″It’s a way to raise capital on their own, if they need capital to be competitive, without having to pull it from the mother corporation.″

Lundberg confirmed that the data storage products group could sell stock in itself to outsiders. As a group or division of Control Data it could not do that, he said.

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