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Technology Stocks : Data General Corp. "dgn" -- Ignore unavailable to you. Want to Upgrade?

To: Spartex who wrote (301)	5/24/1999 4:28:00 PM
From: DJBEINO	Read Replies (1) \| Respond to of 354

Data General Awaits Decision in Patent Lawsuit Against IBM Data General Awaits Decision in Patent Lawsuit Against IBM Westboro, Massachusetts, May 23 (Bloomberg) -- Data General Corp., which transformed itself into computer server and storage maker from a minicomputer company, is approaching a critical phase in its multimillion-dollar patent suit against International Business Machines Corp., lawyers said. Data General sued the world's largest computer maker in 1994, charging that IBM used Data General's technology for memory and other functions in the IBM AS/400 server. Arguments were in January, and a judge's ruling generally comes several months later, patent lawyers not involved in the case said. Data General is asking for a percentage of profits from the IBM computer. Sales of the AS/400 have totaled $30 billion to $35 billion since their introduction in 1988, according to researcher Technology Business Research Inc. A settlement from IBM would boost Data General, whose sales growth has averaged little more than 6 percent since 1994 because of product delays and a loss of customers including Hewlett-Packard Co. ''This could be a big windfall for Data General,'' said Bill Milton, an analyst at Brown Brothers Harriman, who rates Data General shares ''neutral.'' IBM and Data General declined to comment on the suit. IBM, based in Armonk, New York, is the world's biggest computer maker. Data General is based in Westboro, Massachusetts. Shares of Data General fell 1/2 to 13 13/16 on Friday. The shares have fallen 3.5 percent in the last year. IBM fell 2 1/2 to 230 3/8. Behind the Curve Data General, founded in 1968 by engineers who left computer maker Digital Equipment Corp., developed a minicomputer geared toward manufacturers and hospitals. Its first machines, which were cheaper alternatives to big mainframe computers, became a success by filling in gaps in Digital's product line. Digital is now owned by Compaq Computer Corp. Like other minicomputer companies, Data General watched its sales fall in the mid-1980s when it delayed moving into the personal-computer and server markets. Even after developing PCs, the company came close to bankruptcy four years ago. The company revamped its data-storage business last year and fired workers after a string of disappointing earnings. Net income for the fiscal second quarter that ended in March was $1.7 million, or 3 cents share, at the low end of analysts' estimates. Sales fell 1.8 percent. The company blamed the performance on the loss of business from H-P, which is making its own storage systems. Data General said it developed the patents in question as part of its ''Fountainhead Project'' in the late 1970s and early 1980s. With the project -- highlighted in the book ''The Soul of a New Machine'' -- Data General attempted to build a computer to compete with IBM's mainframes. Arguing About Terms The companies' arguments boil down to definitions of terms. Patent cases turn on definitions since the defendant will try to prove the patents are narrowly defined and don't cover the technology in the defendant's computers. The plaintiff typically will argue for the broadest possible definition of the patents. In court papers, IBM argues that Data General's patents define technology, such as the memory that helps speed up information processing, only from the early 1980s. Data General, though, contends that the patent language covers technology present in the latest AS/400 models. Judge Nathaniel Gorton of the U.S. District Court in Worcester, Massachusetts, is evaluating the case to decide the merits of each company's arguments. Although a jury can be assigned in the next phase of such patent suits, most cases are settled out of court, said patent lawyers not involved in the case. A judge's decision at this phase of a suit can heavily swing the case in favor of one company or the other, the lawyers said. ''Other than the trial, it's probably the most important part of a patent case,'' said Steve Anzalone, a patent lawyer for Finnegan, Henderson, a Washington, D.C.-based firm.