Goodbye to a Chimera

To Charles de Gaulle, computer logic was politically straightforward: France, he insisted, must develop a home-grown computer industry capable of competing with the American giants, particularly IBM. For nearly nine years the French government followed his Plan Calcul. Last week France abandoned its pursuit of that chimera and approved the merger of the Compagnie Internationale pour I'lnformatique, a 24% government-controlled computer company, with Honeywell Bull, the Paris-based subsidiary of the U.S. computer maker Honeywell Inc.

The deal marks the second time in two decades that a French computer firm has been taken over by an American one. In 1963 General Electricaise." made a bid to acquire 20% of the ailing Compagnie des Machines Bull, whose shares were once so alluring that it was sometimes called the "Brigitte Bardot of French industry." De Gaulle rejected the offer and instructed then Finance Minister Valery Giscard d'Estaing to find a "solution franc,aise." But the assignment proved impossible, and GE finally gained the equivalent of a 50% stake for $43 million in 1964.

Infuriated, De Gaulle ordered the creation of a competitor, and three small computer firms were eventually welded into the Compagnie Internationale pour I'lnformatique, known as CII. It never really gave Americans much competition. GE increased its holding in Machines Bull to 66% and then sold its interest to Honeywell in 1970. Under the leadership of a former IBM engineer, Jean-Pierre Brule. Honeywell Bull earned a $25.3 million profit in 1974 on sales of $534 million and enjoyed a solid 18%-to-20% share of the French market. By contrast, even with massive infusions of government capital, CII never made money, and its share of the French market remained below 10%. In early 1973, a major CII stockholder, the Compagnie Generate d'Electricite (CGE), began lobbying for a merger with Honeywell Bull. As orders for the first quarter of 1975 lagged 75% behind CII's projections, the government gave in.

France managed to save some face and preserve an image of national ownership. It will own 17% of Compagnie Internationale pour I'lnformatique "CII-Honeywell Bull." The deal also commits Honeywell to sell 19% of its interest in Honeywell Bull to the French government and CGE for "about" $60 million. Eventually, 53% of Honeywell Bull stock will be in French hands, but Honeywell, with its resources and familiarity with the U.S. market, will remain the dominant partner. Beyond that, the French government will endow the company with slightly less than $300 million --mainly in the form of research contracts and study grants during the next four years and give it preferential treatment in awarding contracts.

Political Storm. In France the merger has touched off a political storm. Communists called the deal "sabotage," and Gaullists termed it a "deception." Nonetheless, the deal promises to relieve a drain on the public budget; CII may have chewed up as much as $500 million in government funds over the past 8% years. A purely European solution, like a full merger with Philips of The Netherlands and Siemens of West Germany, would have left the French in a decidedly minority position and without access to the American market, which its marriage with Honeywell Bull now promises.

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