Bull S.A. Business Information, Profile, and History

Company Perspectives:

"As an IT solutions company, we at Bull help our customers to become even more efficient and productive through the use of advanced information technology. We help them to reach new frontiers in operational performance and excellence and we help them to work faster and better to meet the challenges of the net economy."—Guy de Panafieu, chairman and CEO

History of Bull S.A.

Bull S.A., once France's spearhead to counter the global computing dominance of IBM, is redefining itself for the 21st century as a streamlined information technology (IT) services and systems integration company. Since its restructuring, begun at the end of 2000, Bull has reorganized along two primary, autonomous businesses: Integris, its services arm, accounting for 49 percent of the company's 2000 annual sales of EUR 3.24 billion; and Bull Infrastructure & Systems, inheriting the company's background in servers and other computer and IT infrastructure systems, which generated 30 percent of sales. In February 2001, the company surprised the computer industry by selling off its pioneering smart-card division, CP8, to Schlumberger for $325 million. More than 80 percent of Bull's sales come from its European base, with 40 percent of total sales generated in France alone. Despite several decades of operations in the United States, the North American market added only 7 percent of the company's sales in 2000. Bull is led by CEO and Chairman Guy de Panafieu. The company's major shareholders include the French government, France Telecom, NEC, and Motorola.

Computing Pioneer in the 1930s

The origins of Bull lie in the need of insurance companies to process their voluminous data quickly. In 1919 a young Norwegian engineer named Fredrik Rosing Bull invented a counting and sorting machine for his employer, the Store-brand Insurance Company of Oslo. The machine used punch cards to tabulate figures at a rate which, though slow by modern standards, far exceeded the output of Storebrand's best secretaries. Bull did not live to enjoy the fruits of his ingenuity, dying in 1925 at the age of 43. Several years later the employee of a French bank, Georges Vieillard, was asked to develop a better adding machine. He discovered that the patents to Bull's tabulator were held by a Norwegian cancer clinic. Vieillard bought the patents for about $4,000—though he continued to pay royalties for many years—and subsequently founded a Paris company to develop and market the Bull machines. Vieillard quickly ran out of money and turned for help to his punch card supplier, Papeteries Aussedat. The latter was owned by the Callies family, who promptly formed a joint venture with Vieillard called Compagnie des Machines Bull. By 1935 Bull had launched its first significant line, the 150 series of tabulators, and thus found itself locked in a struggle with the French subsidiary of IBM.

For the remainder of the 1930s Bull grew at a modest rate. Most of its customers were banks, nearly all of them French. The company's real expansion came only after World War II had spurred the French scientific community to develop a rudimentary computing machine. Bull seized on this technology immediately after the war, forming alliances with Olivetti and Exacta in Italy and West Germany to develop the computer's business and military potential. In 1951 the company introduced the world's first germanium-diode computer, the Gamma 3, and its sales began a swift climb from $1.5 million in 1950 to $92 million in 1963. By the mid-1950s Bull had wrested 50 percent of the French market from IBM. It opened sales centers across Europe and in Latin America and became a source of considerable pride for the French business community. Bull even exported computer parts to the United States under the Remington Rand name, further proof that the company had earned its skyrocketing stock value. At decade's end, with George Vieillard still managing the firm and the Callies family supplying capital strength, Bull's future appeared assured.

In retrospect, however, it is clear that the company made a significant blunder in 1956. Responding to IBM's introduction of new technology, Bull outlined plans for a new, very large, very fast computer to be available by 1960, and called for that reason the Gamma 60. In effect, IBM had raised the ante, and Bull eagerly matched the pot, its confidence high after a run of record-setting profits. Bull, however, had reached the limit of resources—the Gamma 60 was slow in development, late in delivery, and plagued by a series of mechanical flaws.

By 1962, with IBM's surge continuing unabated, Bull began to feel a profit squeeze. Realizing that international competition demanded international cooperation, the company signed long-term R&D agreements with Honeywell, NEC, and RCA; but these were no immediate help, and by late 1963 Bull's situation was grave. That year the company lost $25 million and could hope to save itself only by merging with a wealthy suitor. General Electric (GE), which coveted Bull's computer experience and worldwide marketing base, offered to buy into the ailing company.

French President Charles de Gaulle forbade the deal, however, because Bull was crucial to the development of French nuclear weapons and therefore could not be tied to any foreign powers. For a precarious year Gaullist nationalism strove with capitalist reality, but the issue was never really in doubt: to compete with IBM, Bull needed the financial muscle and knowhow that GE could offer. In 1964 GE paid $43 million for its 66 percent of the partnership, the French government created a separate company for military research, and together GE and Bull—minus the ousted Callies family—set out to battle IBM.

New Owners for the 1970s

IBM proved to be more than a match for the new partners, and GE's computer venture lasted only a few years. By the end of the 1960s, though Bull-GE was finally showing a profit, the U.S. partner had lost its stomach for the endless struggle with IBM and sold all seven of its computer manufacturing plants to Honeywell. The purchase changed Bull's name once again, this time to Honeywell Bull (HB). The new marriage lasted a bit longer and was somewhat more successful than the Bull-GE association. Honeywell was the second largest computer-maker in the United States, and with its technical experience and financial support was able to raise HB's sales to about $500 million in 1974. At that time the company controlled 17.3 percent of the French computer market, behind IBM but well ahead of relative newcomer Compagnie Internationale de l'Informatique (Cii). The latter had been hastily assembled in 1966 by de Gaulle in response to GE's purchase of Bull, and by the mid-1970s it was apparent that the government wanted to unite France's two native computer companies. In 1976 the merger was effected, with the French state owning 53 percent of the newly christened Cii-HB, and Honeywell the remaining 47 percent.

At this juncture, Cii-HB was still predominantly a mainframe manufacturer and had trouble posting profits. In 1980 sales hit $1.3 billion but net income remained a slim $29 million, and in the following year the company lost money. Honeywell was therefore perhaps not greatly disturbed to learn in 1981 that its share of Cii-HB had become the target of President François Mitterand's new Socialist government. Mitterand wanted to make Cii-HB a fully nationalized concern, and in 1981 signed a contract calling for a gradual buyout of Honeywell's stake in the consortium. Honeywell and the again-renamed Compagnie des Machines Bull would continue to share research and development, however, along with their longstanding partner NEC. Bull surprised most observers by announcing that it was committed to a program of worldwide acquisitions designed to strengthen its microcomputer and office products divisions.

As new Chairman Jacques Stern had predicted, Bull climbed out of the red by 1985 and continued its aggressive tactics. With NEC supplying the processors for a new line of mainframes—the DPS9—and the Bull Questar and Micral lines providing office equipment and microcomputer solutions, the French company soon emerged as a well-rounded international computer maker. Bull still lacked a major opening to the U.S. market, for which reason in 1987 it hooked up with its old partners in a new venture, the Massachusetts-based Honeywell Bull.

Bull acquired 42.5 percent of Honeywell's $1.85 billion computer business at the same time that NEC bought 15 percent, and Honeywell kept 42.5 percent for itself. The deal signaled Honeywell's retreat from the IBM battleground, emphasized the following year when Bull bought up another 22.6 percent of the joint venture and renamed it Bull HN Information Systems. Groupe Bull Chairman Stern thus found himself with a two-headed corporation. Bull HN operated in the United States and Bull S.A., out of Paris; in 1989 Groupe Bull further solidified its U.S. base with the $1.4 billion purchase of Zenith's microcomputer interests, Zenith Data Systems. The resulting firm was truly a worldwide consortium. Two years later, Bull took full control of Bull HN.

Restructuring: 1990s-2000s

Profits again dipped and then disappeared in 1989. Francis Lorentz, elected chairman and CEO in 1989, attempted to bring his company's goals into focus. Even with the government's help—Mitterand had fed Bull over $1 billion in capital between 1983 and 1990—Bull proved unable to continue selling everything from micros to mainframes, and slipped into a long period of losses that ended only in 1995. By 1991, the company was forced to turn to the French government, which provided Bull with a nearly FFr 10 billion rescue package.

By then, Lorentz had been ousted, eventually replaced by Jean-Marie Descarpentries, who led the company on a vast streamlining effort beginning in 1993. In that year, the company bought a nearly 20 percent share in Packard Bell, then transferred its Zenith Data Systems to the fast-growing desktop PC company. By 1995, Bull's streamlining effort—which included cutting much of the company's bloated organization, including reducing its number of Parisian facilities from 25 to just five offices—enabled it to eke out a small profit.

Meanwhile, Bull had continued to launch innovative products, including its DCM architecture, introduced in 1991 and serving as the basis for its OpenMaster integrated systems and network management software; and Escala, the first server built around the PowerPC processor, launched in 1994. That year also saw the release of a CMOS featuring 4.7 million transistors, and leading the way to the introduction of the first fifth-generation CMOS-based mainframe computer in 1997. By then, the company had also introduced a Unix-based mainframe, Sagister.

Descarpentries stepped down in 1997, replaced by Guy de Panafieu as CEO and chairman. Panafieu quickly launched Bull on a new restructuring as the company moved closer to becoming a market specialist. Bull now launched a new investment campaign, solidifying its operations as it focused more tightly on services, servers, and software. At the same time, the company began shedding employees. Yet in 1998, Bull added a new unit, the smart card operations of NBS Technology, and then transferred its software development arm to the United States. That year, also, the company shortened its name to Bull S.A.

Its new restructuring proved costly for the company as Bull saw its profits once again wiped out. By the end of its 1999 fiscal year, the company's losses had mounted to EUR 288 million. Losses continued into 2000, once again topping the EUR 200 million mark. Nonetheless, the company was coming closer to achieving a new corporate identity, which was revealed near the end of the 2000 year. At that time, Bull announced its decision to regroup its operations into two autonomous business units, a services arm, named Integris, and an infrastructure and systems integration wing, Bull Infrastructure & Systems. Bull quickly moved to beef up its newly defined core operations, launching a new subsidiary, Evidian, for the development of e-business security systems software, and acquiring Osis, a specialist consultancy with expertise in systems and telecommunications, and Italy's Arcanet, that country's leading developer of software for the telecommunications industry.

Not all of Bull's reorganization moves were greeted with enthusiasm. Its February 2001 sale of its CP8 smart-card division to Schlumberger for $325 million helped raise the company's cash flow, but also attracted criticism from some industry observers. As one analyst told the International Herald Tribune: "It's the beginning of the end for Bull. They used to sell noncore assets; now they're selling their crown jewel." Whether Bull's refocus was to become the end of an era or the beginning of a new future, the company continued to make its mark on computing history into the new century.

Principal Subsidiaries:Bull S.A. (97.5%); OGIC; SOFOM; European Computer Industry Research Centre (Germany; 33.3%); Evidian; Bull International NV (Netherlands); Bull HN Information Systems Inc. (U.S.A.).

Principal Operating Units:Integris; Bull Infrastructure & Systems.

Principal Competitors: Accenture Ltd.; Acer Inc.; Atos Origin; Cap Gemini Ernst & Young; CMG plc; Compaq Computer Corporation; Computer Associates International, Inc.; Computer Sciences Corporation; Dell Computer Corporation; Electronic Data Systems Corporation; Finsiel S.p.A.; Fujitsu Limited; Gateway, Inc.; Getronics NV; GFI Informatique SA; International Business Machines Corporation; International Computers Limited; Logic Plc; NEC Corporation; Sema Group; Siemens AG; Sopra SA; Group Steria SCA; Sun Microsystems Inc.; Toshiba Corporation; Unilog SA; Unisys Corporation.

Chronology

• Key Dates:
• 1921: Fredrik Rosing Bull invents punch card-based adding and sorting machine.
• 1933: Paul Vieillard acquires Bull patents and founds Compagnie des Machines Bull.
• 1935: Company launches the Bull 150 line of tabulators.
• 1951: Company introduces first germanium-diode computer, the Gammer 3.
• 1964: GE acquires 66 percent of Bull.
• 1966: French government creates Compagnie Internationale de l'Informatique (Cii).
• 1969: Honeywell acquires Bull, which is renamed Honeywell Bull.
• 1976: Honeywell Bull merges with Cii, leaving the French state in control of 53 percent of the newly christened Cii-HB, and Honeywell, the remaining 47 percent.
• 1979: Cii-HB develops first smart-card technology.
• 1982: French government, led by François Mitterand, completes buyout of Bull, which reverts to its original name.
• 1989: Company acquires Zenith Data Systems (ZDS), the microcomputer business of Zenith, for $1.4 billion.
• 1993: Company acquires 20 percent of Packard Bell.
• 1998: Compagnie des Machines Bull changes name to Bull S.A.
• 2001: Bull sells its smart-card division, CP8, to Schlumberger for $325 million.