National Semiconductor Corp., the Santa Clara computer chip maker, said Monday that it has reached a tentative agreement to sell its mainframe computer business to Hitachi Ltd. and a unit of General Motors Corp. for $398 million.
Several analysts said the deal was a great financial coup for National Semiconductor, while others noted that it gives Hitachi, Japan’s fourth-largest computer maker, an even stronger foothold in the U.S. electronics industry.
Under the proposed deal, Hitachi would own 80% of the joint venture buying National Advanced Systems, National Semiconductor’s mainframe computer unit. The remaining 20% would be owned by Dallas-based Electronic Data Systems Corp., the General Motors subsidiary created and later sold by H. Ross Perot. The deal is expected to close within 60 days.
Last month, National Semiconductor said it had reached a tentative accord to sell 50% of its mainframe unit to Memorex Telex NV of Amsterdam for $250 million in cash and 4 million shares of Memorex Telex stock.
Ties to Hitachi
Complications in financing the deal arose, however, and the agreement expired, freeing National Semiconductor to consider other offers, said George Bragg, a spokesman for Memorex Telex’s U.S. subsidiary in Tulsa, Okla. He said Memorex Telex proposed other deals but could not match the all-cash offer from Hitachi and EDS.
National Advanced Systems already has ties to Hitachi. It is the largest distributor of Hitachi’s Japanese-made, IBM-compatible mainframe computers and data-storage systems, with operations throughout the United States and Europe. In its most recent fiscal year, the 2,000-employee unit had sales of $900 million.
However, National Semiconductor has been trying to sell its computer operations to concentrate its efforts on its core, chip-making operations, which have suffered in recent months. In December, the company announced an agreement to sell its DataChecker Systems unit for $90 million to a unit of STC PLC in London.
“From National’s standpoint, it’s a very positive move,” John McManus, of Thomas McKinnon Securities in New York, said of the proposed sale. “They get all the money up front. I think it’s a great move.”
Jim Hammons, a computer industry analyst with the Sierra Group in Tempe, Ariz., also said the deal was good for National Semiconductor but wondered what it would do with all the money.
European Portion to Be Sold
“National couldn’t do anything with NAS,” Hammons said. “So now that they’ve gotten rid of it, the question is what are they going to do with the cash that they couldn’t do with the company?”
National Semiconductor spokeswoman Mary Coady said the money would go toward the retirement of debt and working capital.
Hitachi has said it intends to sell the European portion of the business, which accounts for less than half its revenue, to Comparex Information Systems GmbH for an undisclosed price. Comparex, based in Mannheim, West Germany, is Hitachi’s other sales outlet for mainframe computers in Europe.
As a result of the two sales and two rounds of layoffs in the chip-making operations, National Semiconductor’s worldwide employee count will stand at about 35,000. Its stock closed at $8.25 on Monday, up 12.5 cents, on the New York Stock Exchange.