VIIE ECONONW TYE CM

Computers After Cousins

By JOHN BULL

Mite problems facing the computer industry I look unnervingly like those with which the aircraft industry has battled for the past seven or eight years. Mr Cousins, at the Ministry of Technology, handles the Government's involve- ment. Can he do better than Messrs Sandys, Thorneycroft, Amery, Jenkins et al. at the Ministry of Aviation?

Both industries face severe American com- petition in the home market. Both need to spend

more than they can afford on research and de- velopment and there is the same problem of who foots the bill. In both cases the structure

of the industry is under critical appraisal. Both look to co-operation with Europe as the answer, for neither likes the prospect of a government shareholding. And both have their special prides:

in computers, that we have devised techniques for controlling steelmaking which leave the rest

of the world far behind; in aircraft, that we have a significant lead in vertical take-off procedures. In terms of the labels 'on the machines, most surveys give the United States around half the United Kingdom computer market. But this is really much too crude a method of counting. In the first place, American designs play a con- siderable part in a number of apparently British operations. English Electric Leo Marconi works closely with RCA, Elliott-Automation with National Cash Register, and AEI Electronics with General Electric. Secondly, British-designed machines almost always contain important com- ponents from across the Atlantic. And thirdly, the Americans (IBM, for instance) build machines in this country, use local parts, and sell abroad to the benefit of our export effort.

Mr Cousins's reaction to the 'situation has been to encourage a gentle `buy British' cam- paign. But it is a difficult policy to practise suc-

cessfully. The universities demand machines which at the moment only the United States

makes—a Flowers report conclusion challenged by ICT and English Electric. On the other hand, many will jib if it is true that ITC has got the £10 million-plus order for providing the GPO with its giro system. The contract demands techniques for which United Kingdom manufac- turers have had little experience.

Nor is 'buy British' a self-contained course of action. It demands government cash (in plenty and over a long period) if British companies are to keep up in research and development. At the moment, the Government, through the National Research and Development Council, is providing financial backing for part of ICT's development programme (software and peri- pherals) and for Elliott-Automation's process- control projects. In the case of the former £5 million is involved.

Two points stand out about the ICT agree- ment. First, it does not solve the company's

financial problems over the long term—in fact,

it has been drawn up so that it can easily be expanded. And secondly, it is an arrangement

which is more than a royalty agreement if less than a shareholding. Indeed, in view of its form it is questionable whether an equity stake in' Nicholas Davenport is on holiday. ICT would provide the Government with much more useful influence than it already has.

Certainly there are alternative solutions to the problem of affording the next generation of com- puters. One which Mr Cousins ought to look at is a marriage between ICT and English Electric Leo Marconi. It need not happen all at once. Simply working together now on the models which will appear after 1CT's 1900 series and English Electric's System 4 at the end of the 1960s would be enough for the time being. The English Electric/Vickers/Bristol Aeroplane pro- motion of the British Aircraft Corporation provides something of a precedent.

Another possibility is to join forces with a continental company. The first hope was for a government-backed Anglo-French deal. Unfortu- nately, there is not much of the French computer industry left to unite with, following the Bull- General Electric of America merger. Nor may the General be too keen on more Anglo-Saxons. English Electric, therefore, has started to look at Germany. Siemens and Telefunken are pos- sible partners there:

Should Mr Cousins, then, be spending much more on the industry's research, be dragging unwilling companies to the altar, and be making everyOne in sight buy British computers? Ncit yet. But he will undoubtedly have to do the first two soon if anybody is going to want a British machine in the early 1970s.

acid Elliott-Automation provide investors with the only undiluted stakes there are in com- puters and automation equipment. Both com- panies have just had terrible years: ICT because it was tooling-up, for its new range; 'Elliott because it was caught by cancellations and delays in the aircraft industry., Both will recover this year, as ICI's interim figures and Elliott's report will shortly show. The ICT share price is higher than it should be owing to rumours of a link with General Electric. Neither looks an obvious buy at the moment, though shareholders should not sell at this point.