The Boston area's once-vaunted Route 128 technology corridor marked a symbolic generational passage yesterday.
EMC Corp., the data-storage powerhouse that rose from obscurity this decade to become the biggest independent technology firm in Massachusetts, said it agreed to purchase one of the region's faded jewels, Data General Corp., for about $1.2 billion in stock and debt.
Founded in 1968, Data General pioneered one of the first "mini-computers" in the 1970s, a key platform in the evolution toward smaller computing systems that has continued into this decade. With rival Bay State neighbors such as Digital Equipment Corp., Wang Laboratories and Prime Computer Inc., Data General was among the era's signature technology firms--a status immortalized in Tracy Kidder's 1982 book "Soul of a New Machine," which chronicled the work of Data General's engineers.
"Twenty years ago, we were on top of the world," said Edson de Castro, one of Data General's founders in 1968, and the company's chief executive for 23 years. "But now the world has changed."
In Data General's history, the key change involved the advent of the personal computer in the 1980s. Data General and its rivals were waylaid by the sectors' shift to the desktop--a development that led to their eventual downfall, acquisition or overhaul.
Earlier this decade, Data General attempted to reinvent itself. It got heavily into computer storage, a burgeoning industry that helps large corporation store huge amounts of data.
Nevertheless, Data General has floundered of late--losing $152.4 million in 1998 (with a restructuring charge) on sales of $1.46 million.
Meanwhile, EMC has become an undisputed leader in the sector, with 1998 revenue of $4 billion and a profit of $793.4 million. "It is clearly an 800-pound gorilla in storage," said Carl Howe, a research director at Forrester Research Inc., a Cambridge, Mass., market research firm.
But the Hopkinton, Mass.-based firm, which builds closet-size storage products for large corporations, has struggled to break into the market for mid-size customers--an area in which Data General has built a formidable niche.
Analysts said the "down-market," or mid-range data-storage market, is growing fast and is increasingly vital to EMC. The average price of a storage server tool is now $50,000, compared with $500,000 in 1993, said Robert Gray, research director for storage systems at International Data Corp., a Framingham, Mass.-based computer research company.
"Over the last six or nine months, more and more of our customers have been asking for a mid-range solution," said EMC chief executive Michael C. Ruettgers in an interview. He said the discussions with Data General began in May, and that he doesn't recall which party initiated them.
Ruettgers said he doesn't expect layoffs. EMC currently has about 1,500 job openings, and integrating Data General will be eased by the acquired firm's proximity--about 10 miles away from EMC, in the town of Westborough, Mass.
EMC said it would exchange 0.3262 shares for each share of Data General, or $19.58, a 48 percent premium over Friday's close. EMC's price tag will also include accumulated debt of $212 million. The deal is still subject to shareholder and regulatory approval. Ruettgers said he expects it to close by the end of November.
In trading on the New York Stock Exchange yesterday, shares of EMC dropped $3 a share to $57, while Data General's stock rose $4.25 a share to $17.43 3/4. EMC said it would take an unspecified charge on the purchase when it is completed.