ADP Bunker Buyout May Give IBM-PC New Leverage As Broker Workstation

The Financial Information Services division of Automatic Data Processing, Inc. is expected to lean more toward the IBM-PC as its quote terminal of choice as a result of its planned acquisition of Bunker Ramo Information Systems. The marriage of numbers two and three in the brokerage information business could ultimately yield a strong competitor, but several obstacles remain between point A and point B.

The "for sale" sign had been posted on Bunker Ramo for some time, according to many industry sources. The merger of its parent company, Allied Corp., with Signal Cos., and their subsequent spin-off strategy, only increased the pressure to sell. Terms of the deal have not been disclosed, but industry sources estimate ADP is paying around $80 million for the brokerage business and Bunker's bank teller operation. Both parties are maintaining a "no comment" posture until the deal is concluded, probably in January.

Bunker is currently number two in installed terminals, with 31,000, compared with market leader Quotron's 71,000 in the U.S. ADP-FIS claims 23,000, but one source close to ADP insists that because it generates more revenue per terminal, ADP's revenues are actually higher than Bunker's. The new combination adds up to 54,000 tubes and, all other things being equal, the business could be a real horse race in a few years if, as planned, Quotron loses most of the 18,000 terminals it now provides to Merrill Lynch.

ADP officials are bullish. "This acquisition reflects our continuing commitment to provide expanding services and systems to the financial community in a rapidly changing environment," says ADP president Josh Weston in a prepared statement. Insiders are less restrained. "We will be the dominant supplier in a very short time" because of the "synergism between [our] front office products and back office products," says one, who asks not to be identified. Weston says, however, that the acquisition will have no material effect on ADP's earnings during the current fiscal year, which ends June 30th.

Despite ADP's professed commitment to its FS-Plus brokerage automation system based on Convergent Technologies hardware, the Bunker deal could push the entire division further into the arms of IBM. Bunker recently announced its "Supernet" strategy based on IBM-PCs as workstations (MTR, October 1985). While observers do not expect that strategy to proceed much further under ADP, now that Bunker's customers have been promised IBM in the office, it may be difficult to get them to accept anything else.

This may accelerate what some observe as ADP's general drift in the direction of IBM. The company has brought out an IBM-based brokerage system called "FS-Partner" that parallels the functions of FS-Plus, and in the roll-out of what has been known as Autoquote, its small-office product (MTR, November 1985), the IBM version -- to be called "FS-Colleague" -- is expected to be ready before the Convergent Technologies version -- to be called "FS-Vanguard."

Observers see two principal problems -- one technical and one marketing -- that ADP must overcome in order to really benefit from its acquired market share. The technical problem is how to integrate the two networks quickly, cheaply, and with a minimum of customer disruption. The marketing problem is how to integrate two sales forces into a company which already has a reputation for bloody interdivision rivalries.

The shortest road to increased profitability for both ADP and Bunker is to consolidate the overhead of ticker plants and data networks. The surviving system is expected to look a lot more like today's ADP network than today's Bunker network, although ADP's elves reportedly do have their eyes on a few of Bunker's newer data centers. Generally, though, ADP "can't get too excited with what Bunker had," says one source.

It remains to be seen which box in the ADP organizational chart Bunker will call home -- specifically, whether it will report to FIS president John Gaven or to brokerage services chief Ric Duques. ADP is most likely anxious to avoid another FIS/Comtrend debacle, so the decision may tilt toward Gaven, since FIS and Comtrend now report to Duques. Says one observer of the two units: "These guys would literally rather steal customers from each other than from Quotron." Adding yet a third unit without further internecine warfare will be a delicate task for ADP.