Computer Casualty

Singer Co. showed such vigor in sewing up new acquisitions during the 1960s that Harvard Business School used it as a case study of successful diversification. Now the 124-year-old sewing-machine firm is trying hard to recover from the financial drain caused by some of its acquisitive deals. Last week Singer President Joseph B. Flavin, who was hired away from Xerox two months ago to help end Singer's deficits (TIME, Nov. 24), got started by dumping the business-machine division. It includes data-processing equipment, electronic cash registers and calculators, and has lost about $60 million since 1970. Singer thus joins a large number of corporations that have dropped out of the costly, brutally competitive computer business: notably, RCA, which took a pretax write-off of $490 million in 1971; Xerox Corp., which wrote off $84.4 million last year; and GE, which got out in 1970.

To cover its eventual losses, Singer will set aside a total of $400 million; $325 million is directly related to business machines, the rest to such other money-losing operations as air-conditioning and heating equipment, furniture and industrial sewing. The company has also agreed with its banks not to pay any dividends on common stock during 1976.

The total loss to Singer could be much less than $400 million. The company may be able to sell its business-machines line to some other corporation, and any price paid would reduce the loss. The line includes computer-linked cash registers, which are used in many department stores and by the Sears, Roebuck chain.

Singer's problems in the field stemmed largely from cost overruns in marketing and servicing. In 1974 it had to borrow $150 million to keep the business-machines division operating. Largely because of red ink there, Singer that year posted a loss of $10.1 million, its first deficit since 1917. In last year's first nine months, Singer lost another $36.7 million.

Getting out of computers could save the company up to $120 million in taxes on future profits. Having already divested the company of a West German mail-order house, an Italian manufacturer of refrigerators and washing machines, a water-treatment equipment firm and a phototypesetting product line, Singer's management is clearly concentrating on reducing a debt that now exceeds $700 million and increasing earnings that peaked in 1973 at $94 million on $2.4 billion in sales. Throughout Singer's fling with multinational conglomeration, its oldest product never stopped making money. In 1974 the consumer-products division, chiefly sewing machines, earned $34 million and is thought to have turned a profit of $36 million in 1975.

This file is automatically generated by a robot program, so viewer discretion is required.