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BUSINESS | February 23, 1998 VOL. 151 NO. 7 |
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Software's Hard Guy Charles Wang makes a bold bid for a company much larger than his By RAHUL JACOB Islandia
The racial slights of his childhood may be a distant memory, but Wang last week proved that he's still a street fighter at heart. Computer Associates shocked Wall Street by making a $9 billion hostile bid for Computer Sciences Corp. (1997 revenues: $6.3 billion). Wang insists that Computer Associates' strengths in making business software are a perfect match for csc's talents in advising companies on how to manage their computer systems. After two months of discussions, however, the two sides are unable to agree on a price. So Wang decided to take his $108-a-share bid directly to csc shareholders. "We have made a very, very fair offer," he said in a telephone press conference. A less-than-smitten Van Honeycutt, csc's chief executive, responded with a curt press release: "Any suggestion that there have been negotiations or agreements between the two companies is absolutely false." Few fields are as dull to outsiders as the one where Computer Associates toils, making software that keeps big companies' giant mainframes and client-server networks humming; CA does not make anything for ordinary consumers. But Wang himself is anything but dull. For starters, there is his "acquire and fire" strategy: in 21 years the company has made 60 acquisitions and shed thousands of jobs. Then there is his criticism of society's slavish devotion to information technology: he thinks E-mail is a diversion and bans its use at the company for a few hours a day. Addressing students last year at the State University of New York at Stony Brook-the beneficiary of a $25 million gift from Wang for an Asian-American student center-he reiterated his mantra that "life in the real world is more interesting than life online." Wang has been trying to make things interesting since 1976 when he and CA co-founder Russell Artzt, classmates at Queens College, cemented their friendship by starting a computer services firm together. To keep expenses down, they bartered services for rent and furnishings. By the end of the first year, CA had done more than 200 mainframe installations and had revenues of $600,000. When ibm introduced a new operating system in the 1970s, CA rewrote its products for that and many of the non-ibm systems being introduced at the time. That marked the beginning of a strategy the company has lived and prospered by: in an industry riven by competing and incompatible systems, CA refused to take sides. When everybody wrote off the mainframe after personal computers took over the office in the early 1990s, Wang stuck with making software for the big clunkers. But he also pushed ahead with developing products for the powerful new client-servers that made it possible to network PCs together. CA's hot four-and a half-year-old software product, the Unicenter, is a distillation of this approach. A sort of cyber-Jeeves, it acts as gofer and troubleshooter all at once, managing diverse systems across a company by sche-duling and distributing work in a seamless way that prevents systems from crashing. It's easy to see why Wang wants to take over csc, which excels at advising companies about the hardware and software they need. Such consulting and outsourcing is the fastest growing sector of the business software industry, and adding it would make CA a full-service Jeeves to big companies. But the takeover is hardly a done deal. Southern California-based csc has a culture that is, quite literally, a continent away from CA's hard-driving Islandia, New York base. Many analysts think CA's bid will be successful, though some note that csc's most valuable assets, its employees, go home every night. An ugly acquisition battle could lead many to quit the company, which is what happened when CA last ventured into California. In 1994, the company acquired ask, a database-management software firm, and Wang warned of large layoffs. The majority of employees in ask's most prized division, Ingres, promptly headed for the door, which some argue set back a crucial product launch by a couple of years. Recalls one departee: "There are a couple of thousand people in the Bay Area who don't like CA." This time around, Wang vows to keep "all, and I say again, all" of csc's 44,000 employees. Wang could well end up acquiring csc; his bid may have been helped by a class-action suit filed late last week by a csc shareholder against its management, charging that they were acting in a manner "calculated to benefit themselves." csc's stock rose 21% for the week, closing at more than $107. But to make the takeover a success, Wang may have to shed some of the rough edges he acquired back in Queens.
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hen charles wang was eight, his family moved from Shanghai to a rough-and-tumble neighborhood in Queens, a borough of New York. A couple of years later, the family put together the down payment for a modest home, but would-be neighbors circulated a petition asking the owner not to sell to Asians. Wang, 53, doesn't enjoy telling that tale: he has come to believe that America is marked not by meanness toward immigrants but by generosity. It has certainly been good to him. Computer Associates, the firm he founded two decades ago, had $4.5 billion in revenues last year, counts more than 95% of the Fortune 500 among its clients and is now the world's third-largest independent software company, after Microsoft and Oracle.