Ford or Edsel?

William C. Norris was once fond of claiming that Control Data Corp., the company that he formed nearly 15 years ago, was destined to play Ford in the computer industry to IBM's General Motors. And indeed he put together with astonishing speed a company that by 1968 was making more money selling and leasing computers than anyone except IBM. But now the Minneapolis-based CDC looks more like a computer Edsel. Its share of the global market has dwindled to 2.7%, from 4.2% four years ago, and in the past two years it has lost more than $45 million on computer operations. In order to raise badly needed cash last year, it sold off or leased some of its extensive Minneapolis property holdings, and it was able to swing a loan of $245 million from a group of 14 banks headed by Chase Manhattan only after agreeing to let Chase lock up some of a subsidiary's stock in a vault as security.

In part, CDC has been a victim of the 1970 recession and the slow 1971 recovery. Its key business is supplying mammoth, superfast computers to nuclear researchers, university laboratories and aerospace companies--all of which have had to cut their budgets. Also, the hefty profits that CDC once earned by selling rotating disc files, line printers and other peripheral gear have all but disappeared. IBM has become a major manufacturer of peripherals for its own and other computers and sells them at prices lower than those that Control Data has been used to charging.

Equally important, however, has been Norris' penchant to spend money faster than CDC could earn it. Norris, a 60-year-old former Univac general manager, has been determined not to pinch pennies in his drive to challenge IBM. Last year, in order to attract more business, he built six data centers at a cost of $10 million each. When financial aides advised him to build only one center at a time, Norris branded their counsel "chicken-hearted." He has maintained an inventory of more than $300 million worth of computers and peripherals, about twice what the company's $540 million annual revenues would require. He has also spent $1.5 million annually since 1968 on an antitrust suit charging IBM with unfair trade and advertising practices; competitors doubt that he will recover enough in damages to pay the cost.

Dependent Parent. Undeterred, Norris is spending more money. Under a deal arranged two weeks ago with National Cash Register, CDC will spend $25 million on a joint venture that will design and manufacture peripherals and make the computers of both companies compatible. Norris contends that the joint venture will enable both firms to share research and development costs, while providing each with a full line of computers. Other computer executives, noting that NCR has only 3.9% of the worldwide computer market, gibe that the joint venture is only a case of "putting two losers together." An earlier attempt at a merger with Honeywell, a profitable computer maker also based in Minneapolis, fell through when Norris insisted that he become head of the merged operation.

Norris has made one effective acquisition: in 1968 Control Data bought Commercial Credit Co. of Baltimore, a highly profitable financing, leasing and insurance operation. In 1970, even Commercial Credit's earnings could not keep Control Data in the black; whether they did so last year depends upon what write-offs, if any, Norris might make in the computer business. Either way the parent is now looking to the stepchild for support.

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