Ganging Up On Snow White

With whimsical bitterness, European computer makers sometimes call themselves "the Seven Dwarfs." In their real-life grim fairy tale, Snow White is played by IBM, and the handsome prince she runs off with is some 60% of the multibillion-dollar European computer market. Hoping to break up the romance, the European Common Market Commission is readying a major proposal for the so-called dwarfs* to gang up on Snow White.

Though the report may not be out for a while, European computer firms are already forming alliances and are cutting into IBM's share of the fast-growing market. Last year West Germany's Siemens and France's Compagnie Internationale pour 1'Informatique (CII) agreed to follow a common production policy and progressively merge their marketing departments. Each has already taken over the other's operations in its country, and by 1975 the two hope to market a unified line of computers that would be compatible with IBM equipment. The combination will become stronger if The Netherlands' giant Philips merges its computer branch with the Siemens-CII syndicate; negotiations have been going on for months.

A similar agreement may be in the works between Britain's International Computers Ltd. and Germany's AEG-Telefunken and Nixdorf Computer companies, all of which make computers that are incompatible with IBM's. ICL is the only European firm that is turning even a marginal profit on its computer operations--in no small mea sure because of some $80 million in government subsidies that it has received since its creation in 1968 by the merger of two smaller firms.

The formation of the two groups is not what the European Economic Community has in mind. It would prefer European computer firms to unite in one association producing a single line of compatible computers using the same hardware and software. Only through affiliation on this scale, the EEC believes, can European concerns compete strongly against IBM, which controls its huge market slice largely because of its sheer size. With revenues last year of $9.5 billion, IBM had enormous resources to commit to research and marketing. The revenues of the largest European-based computer maker, ICL, were about $450 million.

IBM faces pressures at home as well as abroad. Last week the Justice Department asked a federal judge to hold the company in contempt of court un less it produces some 1,200 internal documents that the Government says it needs for a longstanding antitrust suit. The EEC too would like to see Snow White split up into several parts, even though that, admits Christopher Layton, the Common Market Commission's director for advanced technology industries, "wouldn't solve the competition problem." The solution will require an intensive sales program to convince European buyers that home-grown computers are equal to IBM's. One indication of how difficult that may be: the Common Market Commission itself used IBM computers until last year--and then switched to French CII machines only because of an avowedly "political decision."

* IBM's Stateside competitors have also long been called the Seven Dwarfs.

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