Two of America's largest corporations are joining forces to compete in the fast-growing multibillion-dollar office automation marketplace.
American Telephone & Telegraph Co. and Electronic Data Systems Co., acquired last summer by auto giant General Motors Corp. for $2.55 billion, yesterday announced a "joint business agreement" to develop and market customized data processing systems for large corporate and government customers.
The move allies the AT&T Information Systems division, which markets a line of computer and telecommunications products, with one of the nation's largest computer services companies, which has special expertise in software and a reputation for aggressive marketing.
GM acquired EDS last year to be its spearpoint into its high-technology diversification efforts in areas ranging from data processing and communications to factory robotics. AT&T, which has publicly declared its interest in finding new partners, is pushing to make headway against companies such as International Business Machines Corp. and Wang Laboratories Inc. in the intensely competitive office computer market.
"What this says is that AT&T is willing to recognize the fact that it is a new boy in town and has to go to where the recognized expertise is, and EDS Chairman Ross Perot's company has been spectacularly successful," said Robert E. LaBlanc, a telecommunications industry consultant.
"I think it's very smart. For a long time, there was a 'not invented here' syndrome at ATT, that anything that's done by someone else, we can do better. That attitude has been quickly disappearing."
The agreement is a partnership, rather than a joint venture, because there is no equity involved in the arrangement.
The agreement, which goes into effect Feb. 1, calls for roughly 150 EDS employes to be detailed full-time to AT&T Information Systems. According to AT&T, more than 50 EDS employes will be placed in AT&T-IS sales offices around the country. The others will work in two New Jersey sites to do systems evaluation and design.
"This joint effort offers EDS a sizable opportunity to capture business that would be otherwise difficult for it to obtain," said Stephen McLellan, a Salomon Bros. vice president. "It should mean an additional $50 million a year or more revenue for EDS."
EDS, which reported $786 million in revenue during its last fiscal year, earns the bulk of its revenue by managing data processing services for large corporate and government clients. The company has a reputation for being able to integrate clients' disparate computer systems -- including those made by AT&T -- into corporate-wide networks.
"This is the era of systems integration," said Salomon's McLellan. He pointed out that EDS would be able to help sell AT&T computer systems to its customers.
"What we're really doing here is merging two experienced assets," said Robert J. Casale, executive vice president of AT&T Information Systems. "Our assets in communication and computers and EDS's abilities in systems integration in order to address these opportunities in the marketplace."
AT&T said it sees a market of $8 billion to $10 billion by 1986 for the type of service the two companies will offer. The company said it will seek 60 to 100 proposals this year for the partnership from the private sector and from government agencies. Company officials estimated that the average proposal would be for $25 million to $30 million.
A GM spokesman said the EDS-AT&T arrangement "is a logical extension of the broader game plan" involving EDS's affiliation with the car company.
GM has an extensive private telecommunications network that moves "a massive amount of data globally," the spokesman said. EDS has been given responsibility for expanding GM's telecommunications network, and "AT&T probably wants to be in a position to share" in some of that development. "What you're looking at is the emergence of another telephone system" involving EDS and GM, the GM spokesman said. The agreement between EDS and AT&T "means that EDS has got to be reckoned with as a force in telecommunications."