First Financial Management Corp. has filed a $150 million lawsuit on behalf of its bank data processing subsidiary against International Business Machines Corp., citing breach of contract.
The suit contends that IBM has failed to supply the manpower necessary meet its contractual obligations for installing software and training personnel at the data processing clients of the First Financial unit, Basis Information Technologies Inc.
Sale Possible
Basis, based in Atlanta, supplies computer services to about 800 small and midsize financial institutions.
While announcing the suit, First Financial Management executives said Basis might be put up for sale.
They declined to be specific about what would trigger such action.
Patrick H. Thomas, First Financial's chairman and chief executive, mentioned the sale possibility in remarks printed in his company's third-quarter earnings report.
"We are evaluating the strategic significance of the business of our wholly owned subsidiary Basis Information Technologies," Mr. Thomas said.
In light of the IBM dispute, he said, "the company is considering various alternatives, including the possible sale of Basis."
IBM officials confirmed that a lawsuit had been filed, but they declined to comment.
First Financial said it was interested in resolving the suit as soon as possible.
The case revolves around a Dec. 31, 1989, contract in which IBM committed itself to co-develop banking software that would run in Basis' computer service bureau.
The development project, which involved adapting software from Hogan Systems Inc., Dallas, for a small-bank environment, has been completed. Several institutions are using the finished product.
However, a number of other institutions are still waiting to be converted to the new software. First Financial executives said IBM has not supplied enough employees to keep up with the demand for systems integration and training at these institutions.
"We don't think the effort that we contracted for has been brought to this project," said Donald Y. Sharp, a First Financial vice president.
First Financial officials declined to discuss the business implications of this service backlog. But sources close to the company said the problems with IBM had resulted in some lost business for Basis.
Officials of First Financial said a decision on selling Basis would not be based solely on the outcome of the IBM suit. They also said, however, that present conditions make it hard to profitably operate their service bureau business.
First Financial has already moved to sell one subsidiary this year. Under a recent agreement, the company will sell First Family Financial Services for $243 million.
The parent company reported $31.7 million in net income for the third quarter. Its executives declined to estimate the market value of Basis.
