Control Data to Split Into Computer, Services Firms

Control Data Corp. said Wednesday that it will complete its transformation from an old-line computer maker to a computer services firm by splitting itself in two.

The company said it will spin off its computer operation as an independent company while the remaining Control Data Corp., based in Minneapolis, will rename itself Ceridian Corp., effective June 1.

The firm said it will reduce its earnings this quarter by a $400-million accounting charge, in part to pay for costs associated with the plan.

Ceridian will own Control Data’s operations that provide computer services, such as payroll processing. The company will also own Arbitron, which provides audience ratings for TV and radio shows; a service that authorizes checks and credit cards at cash registers, and a company that sells computers to government agencies.

The computer spinoff, called Control Data Systems Inc., will own the traditional computer business. The division no longer makes its own computers but resells machines from Silicon Graphics Inc., Mips Computer Systems Inc. and NEC Corp. of Japan.

As part of the deal, Silicon Graphics, which owns Mips, will take a 10% stake in the new company. NEC is considering buying a 5% stake, Control Data said. The value of the combined stakes will be $20 million to $30 million.

Ceridian would have had revenue of $951 million last year if the split had been in effect then, while the computer division would have taken in $574 million, Control Data said.

Control Data shares rose $1.625 to $13.374 in New York Stock Exchange trading. A company’s stock often rises when it announces a spinoff, in the belief that the value of the separate companies may exceed that of the combined firm.

Founded in 1957 by William Norris, Control Data became a major maker of giant mainframe computers, competing head to head with industry leader IBM.

The company’s success freed Norris, who retired in 1986, to pursue his goal of making capitalism more socially conscious. He invested company funds in education and job training and building plants in depressed urban areas.

Like many mainframe makers, Control Data slumped as the industry was challenged by smaller, cheaper machines.

Faced with financial problems, Control Data moved out of the mainframe business and sold many of its operations the past few years, including its financing company and its computer chip business. The sales left it a much smaller concern.

Under the plan announced Wednesday, the stock in the new Control Data Systems will be distributed as a dividend to existing Control Data stockholders. The distribution is expected to be tax-free.

The plan requires approval from Control Data’s banks and directors. The spinoff is expected to take place in the next few months.

Control Data said it will inject $95 million into the new company.