DGN writeup by TheStreet.Com FWIW.
Data General, In Play Again
<Picture>By Eric Moskowitz
Senior Writer
3/22/99 9:00 PM ET
Data General (DGN:NYSE) is in play. Again.
The Westboro, Mass.-based server and storage maker jumped up 2 1/8, or 21%, to
12 5/16 Monday on heavy trading -- about eight times the average volume of shares
exchanged hands. The word on the Street is that two suitors are ready to snap up Data
General's CLARiiON storage division. According to one trader who requested
anonymity, that division alone is worth $20 a share.
Hardware and PC maker Hewlett-Packard (HWP:NYSE) and computer storage king
EMC (EMC:NYSE) are the leading candidates, say traders.
"For EMC, it would be a damn good move to take Data General out of play," says one
Wall Street analyst, who requested anonymity. "Because if EMC doesn't do it, H-P or
Dell (DELL:Nasdaq) eventually will."
Data General is seen as particularly vulnerable right now, in the aftermath of the
Dell-IBM (IBM:NYSE) deal announced with great fanfare earlier this month. Dell, a
key buyer of Data General storage systems, has entered into an agreement to buy $16
billion worth of products from IBM over the next seven years.
Companies making enterprise storage have become hot properties, as Web sites
proliferate and corporations require more storage space to handle their growth on the
Internet. Dell's decision to start buying storage systems from IBM weakens Data
General's position.
EMC spokesman Mark Fredrickson says that the company doesn't comment on rumors
or speculation. The only thing EMC has in common with Data General, he notes, is
geography: Both companies reside in the 508 area code zone of Massachusetts.
"Although we coexist in the same marketplace, there is no relationship between us and
Data General ,which makes lower-end storage systems," says Fredrickson. Data
General officials weren't immediately available for comment, and an H-P spokeswoman
also says the company doesn't comment on rumors.
Last November, Data General was rumored to be a takeover candidate for either Sun
Microsystems (SUNW:Nasdaq) or Storage Technology (STK:NYSE), according to
Business Week's "Inside Wall Street." The article also viewed H-P and IBM as good
candidates to buy Data General, which shot up to a high of 21 in December on these
rumors.
Renewing takeover fever was the active play in Data General's call options--frequently
used by speculators to play potential takeovers. Options players leaned towards the
April 12 and out-of-the-money April 15 contracts today. Each traded close to 300
contracts and saw big jumps in premium.
On the April 12 1/2 calls, buyers were willing to pay 1 15/16, or $193.75, today as
opposed to the mere 5/16, or $31.25, they paid on Friday. The price of the April 15
calls rose 5/8, or $62.50, to 1, or $100. That kind of increase in options premium
generally means that buyers don't mind paying higher prices because they anticipate a
major rally in the underlying stock.
Michele Skupp, of the Seidman-Skupp options team at Miller Tabak Hirsch, says a
Data General takeover has been rumored "for years and years and years. At this level,
it's interesting because it's so low."
Associate Editor Dan Colarusso contributed to this article.
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