New company to make Rockville unit its core
General Electric Co. is teaming up with Ameritech, the Chicago-based Baby Bell, to create a company to target the growing market of "electronic commerce." The core of the new company will be the Rockville-based GE Information Services unit.
The deal is a complicated one, because Ameritech, as a result of rules stemming from the Bell System breakup, is barred from taking a direct role in the venture. Instead, it will invest $472 million in the new company, with an understanding that it will hold 30 percent ownership and two of five board seats if the current restrictions are lifted.
"This alliance will enhance our understanding and use of electronic commerce applications, a field growing at more than 20 percent annually," said Richard C. Notebaert, Ameritech president and chief operating officer.
Electronic commerce is a catch-all term referring to the exchange by customers, suppliers, banks and the like of a wide range of business data -- orders, invoices, payments, mail and inventory information among them. It specifically includes Electronic Data Interchange, or EDI, a set of detailed standards for trading such information.
At Ameritech, spokesman Michael Brand declined to unveil the unit's strategic plans, but commented, "It will be increasingly important for small business to operate on a more sophisticated level," to be part of global "electronic trading communities."
He pointed out that Ameritech hopes to trade on its strengths in networking and that 70 percent of its business customers are classified as small businesses.
"Paper is just not the most efficient way to transmit information," Mr. Brand said.
The new company will be headed by Hellene S. Runtagh, the current president and chief executive of GE Information Services.
The GE unit has been a leader in the EDI marketplace. This month it completed a deal with Transaxion S.A. of Chile that it NTC hopes will greatly increase its EDI presence in Central and South America.
MicroProse stock takes a nose-dive
MicroProse Inc. stockholders who chose to hold on to their shares through this month's merger with Spectrum Holobyte may feel like they've been hit by a depth charge in one of the company's famed flight simulator programs.
The stock started out the month at $14.50 Dec. 1 and slid to $9.375 as the merger was approved Dec. 14. It ended up last week at $8.875.
Analyst William Loomis at Ferris, Baker Watts & Co. Inc. was not surprised by the drop in the shares, given what the merger proxy revealed of Spectrum's income, balance sheet and track
record. MicroProse shareholders wound up with 40 percent ownership of the combined company.
A Ferris, Baker Watts report estimated a fair share price of twice sales, which would be about $8. Recent changes, Mr. Loomis said, brought the price "back to reality."
John W. "Wild Bill" Stealy Sr., formerly chairman and majority owner of MicroProse, has been selling off large blocks of stock in recent weeks. He filed on Dec. 10 to sell 246,050 shares, and last Monday to sell 357,825 shares. At one time he held 3.6 million shares.
The company's fortunes can't be helped by the failure to produce several new products in time for the Christmas shopping season. The new MicroProse game "F-14 Fleet Defender" is now scheduled for release in January. Likewise, Spectrum missed the mark with an F-18 flight simulator, Mr. Loomis said.
MicroProse has also failed to deliver "C.P.U. Bach," its premier product for the new 3DO machine. The program, which uses mathematical models to compose and play live music in the style of the late 1700s, was set back by delays in the design of the 3DO's sound-generation circuits and software, according to MicroProse spokesman C. Matthew Fick.
That problem is not a major financial setback, he said, because even total penetration of the 3DO market would produce only about 30,000 sales at this point. By comparison, there are tens of millions of personal computers and machines such as Nintendo and Sega; Acclaim Entertainment is said to have produced 3 million copies of the season's hot video game "Mortal Kombat."
Computer Data wins $91.7 million pact
Computer Data Systems Inc. of Rockville will be the prime contractor for the U.S. Department of Education's new Federal Direct Student Loan Program.
The company announced last week that it had won a $91.7 million contract for the next 20 months, with five one-year options that could bring the total value to $376 million.
Under the direct loan program, students will receive loan directly through their schools rather than from private lenders. The Education Department said the program will save an estimated $4.3 billion through fiscal year 1998.
A company spokeswoman said the bulk of the work will b divided between Rockville and the Utica, N.Y., offices of AFSA Data Corp., which will handle the actual loan servicing.
She was unable to project the staffing levels, which will increase along with use of the program.
CDSI, with $181 million in revenue in its latest fiscal year, which ended June 30, does almost all of its business with the federal government.