Compagnie Des Machines Bull S.A.

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Compagnie Des Machines Bull S.A.

121, avenue de Malakoff
75116 Paris
France
(1) 45 02 90 90
Fax: (1) 45 02 96 96

State-Owned Company
Incorporated: 1933
Employees: 43,617
Sales: FFr33.72 billion (US$5.84 billion)

French nationalism has insisted that the country maintain a strong presence in the international computer business, and since 1976 Compagnie des Machines Bull—known informally as Groupe Bull—has been the government-owned candidate for that role. In order to survive international competition, many European computer manufacturers have been forced to become international themselves, in order to amass the requisite technical expertise and marketing strength. As a result, Bull has long been allied with various foreign corporations, including General Electric, NEC, Olivetti, and Honeywell, and today stands as the only computermaker with native roots in both the United States and Europe, and is Europe’s largest computer maker. Groupe Bull’s two divisions, Bull S.A. in Paris and Bull HN Information Systems in Massachusetts, together produced sales of $5.3 billion in 1988—but made just 1% profit for their efforts, and followed that with a loss in 1989. Poor profits have not been unusual for Bull ever since it locked horns with International Business Machines (IBM) in the late 1950s and emerged the clear loser. It thus remains a question whether Bull, even with government subsidies, will be able to find a profitable niche for itself in the tightening global information business.

The origins of Bull lie in the need of insurance companies to process their voluminous data quickly. In 1919 a young Norwegian engineer named Fredrik Rosing Bull invented a counting and sorting machine for his employer, the Storebrand Insurance Company of Oslo. The machine used punch cards to tabulate figures at a rate which, though slow by modern standards, far exceeded the output of Storebrand’s best secretaries. Bull did not live to enjoy the fruits of his ingenuity, dying in 1925 at the age of 43. Several years later the employee of a French bank, Georges Vieillard, was asked to develop a better adding machine. He discovered that the patents to Bull’s tabulator were held by a Norwegian cancer clinic. Vieillard bought the patents for about $4,000—though he continued to pay royalties for many years—and subsequently founded a Paris company to develop and market the Bull machines. Vieillard quickly ran out of money and turned for help to his punch card supplier, Papeteries Aussedat. The latter was owned by the Callies family, who promptly formed a joint venture with Vieillard called Compagnie des Machines Bull. By 1935 Bull had launched its first significant line, the 150 series of tabulators, and thus found itself locked in a struggle with the French subsidiary of IBM.

For the remainder of the 1930s Bull grew at a modest rate. Most of its customers were banks, nearly all of them French. The company’s real expansion came only after World War II had spurred the French scientific community to develop a rudimentary computing machine. Bull seized on this technology immediately after the war, forming alliances with Olivetti and Exacta in Italy and West Germany to develop the computer’s business and military potential. In 1951 the company introduced the world’s first germanium-diode computer, the Gamma 3, and its sales began a swift climb from $1.5 million in 1950 to $92 million in 1963. By the mid-1950s Bull had wrested 50% of the French market from IBM. It opened sales centers across Europe and in Latin America and became a source of considerable pride for the French business community. Bull even exported computer parts to the United States under the Remington Rand name, further proof that the company had earned its skyrocketing stock value. At decade’s end, with George Vieillard still managing the firm and the Callies family supplying capital strength, Bull’s future appeared assured.

In retrospect, however, it is clear that the company made a significant blunder in 1956. Responding to IBM’s introduction of new technology, Bull outlined plans for a new, very large, very fast computer to be available by 1960, and called for that reason the Gamma 60. In effect, IBM had raised the ante, and Bull eagerly matched the pot, its confidence high after a run of record-setting profits. Bull, however, had reached the limit of resources—the Gamma 60 was slow in development, late in delivery, and plagued by a series of mechanical flaws.

By 1962, with IBM’s surge continuing unabated, Bull began to feel a profit squeeze. Realizing that international competition demanded international cooperation, the company signed long-term research-and-development agreements with Honeywell, NEC, and RCA; but these were no immediate help, and by late 1963 Bull’s situation was grave. That year the company lost $25 million and could hope to save itself only by merging with a wealthy suitor. General Electric (GE), which coveted Bull’s computer experience and worldwide marketing base, offered to buy into the ailing company.

French President Charles de Gaulle forbade the deal, however, because Bull was crucial to the development of French nuclear weapons and therefore could not be tied to any foreign powers. For a precarious year Gaullist nationalism strove with capitalist reality, but the issue was never really in doubt: to compete with IBM, Bull needed the muscle and know-how that GE could offer. In 1964 GE paid $43 million for its 66% of the partnership, the French government created a separate company for military research, and together GE and Bull— minus the ousted Callies family—set out to battle IBM.

IBM proved to be more than a match for the new partners, and GE’s computer venture lasted only a few years. By the end of the 1960s, though Bull-GE was finally showing a profit, the U.S. partner had lost its stomach for the endless struggle with IBM and sold all seven of its computermanufacturing plants to Honeywell. The purchase changed Bull’s name once again, this time to Honeywell Bull (HB). The new marriage lasted a bit longer and was somewhat more successful than the Bull-GE association. Honeywell was the second-largest computer-maker in the United States, and with its technical experience and financial support was able to raise HB’s sales to about $500 million in 1974. At that time the company controlled 17.3% of the French computer market, behind IBM but well ahead of relative newcomer Compagnie Internationale de l’Informatique (Cii). The latter had been hastily assembled in 1966 by de Gaulle in response to GE’s purchase of Bull, and by the mid-1970s it was apparent that the government wanted to unite France’s two native computer companies. In 1976 the merger was effected, with the French state owning 53% of the newly christened Cii-HB, and Honeywell the remaining 47%.

At this juncture, Cii-HB was still predominately a mainframe manufacturer and still had trouble posting profits. In 1980 sales hit $1.3 billion but profit remained a slim $29 million, and in the following year the company lost money. Honeywell was therefore perhaps not greatly disturbed to learn in 1981 that its share of Cii-HB had become the target of President Francois Mitterand’s new Socialist government. Mitterand wanted to make Cii-HB a fully nationalized concern, and in 1981 signed a contract calling for a gradual buy-out of Honeywell’s stake in the consortium. Honeywell and the again-renamed Compagnie des Machines Bull would continue to share research and development, however, along with their long-standing partner NEC. Bull surprised most observers by announcing that it was committed to a program of worldwide acquisitions designed to strengthen its microcomputer and office-products divisions.

As new chairman Jacques Stern had predicted, Bull climbed out of the red by 1985 and continued its aggressive tactics. With NEC supplying the processors for a new line of mainframes—the DPS9—and the Bull Questar and Micral lines providing office-equipment and microcomputer solutions, the French company soon emerged as a well-rounded international computer maker. Bull still lacked a major opening to the U.S. market, for which reason in 1987 it hooked up with its old partners in a new venture, the Massachusettsbased Honeywell Bull.

Bull acquired 42.5% of Honeywell’s $1.85 billion computer business at the same time that NEC bought 15%, and Honeywell kept 42.5% for itself. The deal signaled Honeywell’s retreat from the IBM battleground, emphasized the following year when Bull bought up another 22.6% of the joint venture and renamed it Bull HN Information Systems. Groupe Bull Chairman Stern thus found himself with a twoheaded corporation. Bull HN operated in the United States, and Bull S.A. operated out of Paris; and in 1989 it further solidified its U.S. base with the $1.4 billion purchase of Zenith’s microcomputer interests, Zenith Data Systems. The resulting firm is truly a worldwide consortium.

Profits again dipped and then disappeared in 1989. Francis Lorentz, elected chairman and CEO in 1989, must attempt to bring his company’s goals into focus. Even with the government’s help—Mitterand fed Bull over US$1 billion in capital between 1983 and 1990—some observers doubt that Bull will be able to continue selling everything from micros to mainframes. The industry as a whole is moving rapidly toward greater specialization, each company scurrying to find a niche in which it can offer value-added products while buying its standard components as needed. Bull has long been a champion of the so-called open-systems approach, whereby all computers and software will eventually be compatible with one another. Such compatibility tends to make much computer equipment interchangeable, encouraging low-priced mass production and forcing most competitors to find a way to sell something more than the typical products.

Bull prides itself on its willingness to get involved with each company’s data requirements and tailor a system accordingly. Like most computer firms, Bull no longer simply sells machines, it provides information networks; and by doing so hopes to keep France at the forefront of global developments for many years to come.

Principal Subsidiaries

Bull S.A. (97.5%); OGIC; SOFOM; European Computer Industry Research Centre (Germany, 33.3%); Bull International NV (Netherlands); Bull HN Information Systems Inc. (U.S.A.).