Amdahl Beefs Up Services Business With Acquisition
Apr. 03, 1996
NEW YORK (AP) _ Amdahl Corp., a maker of mainframe computers, acquired the technology services firm Trecom Business Systems Inc. Wednesday for $140 million.
The purchase is another step in Amdahl's effort to put together a consulting and services business. As computers and data networks have become more complex, customers increasingly want manufacturers to help them design and sometimes run big systems.
Such operations are also more lucrative for computer makers. Prices and margins for computers themselves have fallen sharply over the past decade as they have been built around less costly components.
The services business at IBM Corp., Amdahl's biggest rival, is now the biggest contributor to its profits. IBM's services business has grown sharply over the past few years but is rooted in an operation that stretches back more than 40 years.
By contrast, Amdahl has had to build its operation from the ground up. It took a major step last fall with the $210 million purchase of the consulting firm DMR Group Inc.
``DMR plus this are very much the kinds of deals Amdahl had to make in order to play in the services game,'' said analyst Bob Djurdjevic, president of Annex Research in Phoenix. ``There really wasn't much of a choice. They had practically no business of this kind three years ago.''
With the addition of Trecom, services and software development will account over half of Amdahl's expected $1.5 billion in revenue this year, said John Lewis, chief executive officer of the Sunnyvale, Calif.-based company.
Trecom, based in Edison, N.J., had revenue of $135 million last year and is expected to grow 25 to 30 percent this year. About 75 percent of its revenue is in services to telecommunications companies though the company is diversifying, said Manny Arturi, the company's chief executive.
Amdahl this summer will roll out a new line of mainframes based on the same kinds of chips that drive servers and personal computers. IBM since the fall of 1994 has the market to itself with mainframes of that design and has been at production capacity every quarter since.
Amdahl's stock was down 6 1/4 cents to $8.93 3/4 on the American Stock Exchange in afternoon trading.