NEW YORK, March 3: Wang Laboratories Inc's $390-million deal to buy the computer integration business of Italy's Olivetti SpA will result in substantial cost savings by combining redundant operations at the companies, Wang's chief financial officer said.In a phone interview Monday, Frank Caine, Wang's CFO, also said Wang expected the acquisition to boost earnings in the first full year after the deal closes, but declined to provide specific figures.
In addition, he said the deal will be cash-flow negative on an operating basis for Wang during the current year, but positive in 1999. Wang's 1998 fiscal year ends in June.
He said the company's board would consider possible restructuring actions at a meeting later this month that would result in job cuts at both Wang, with 10,000 employees, and in the Olivetti unit, with 12,000 employees, that Wang is acquiring.
But Caine would not provide figures on the potential cost savings or reduced head count that would result from such actions until Wang hasfinalised its restructuring plans.
Only after the board meets in several weeks will Wang be ready to detail the extent of cash and non-cash charges that will result from its restructuring plans and the time frame for when such charges will be accounted, the CFO said.
"We expect the (acquisition) to be a plus to earnings per share in the first full year after closing," Caine said, adding that it would contribute significantly after that.
In addition, he said the combined company was expected to be operating cash-flow negative in 1998 but positive in 1999.
"We will be taking a number of restructuring actions," Caine said, noting that the moves would "take out a fair amount" of the combined company's general and administrative costs.
Wang Global, as the combination of Wang with Olivetti's Olysy group is to be known, will create Europe's No 1 provider of personal computer and network services, integration and technical support.
Wang Global will rank fourth in the world behind Electronic Data SystemsCorp, International Business Machines Corp and Hewlett-Packard Co, Caine said.
Caine said he believes the Olivetti business Wang is buying to be "modestly profitable, but only modestly profitable." However, he stressed that Wang had no plans to alter itsbusiness model in light of the acquisition, which remains targeted at returning gross margins in the low 20 per cent range and operating margins in the six per cent to seven per cent range. "That's the model we will use to drive the entire business,"Caine said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
