After many long months of rumor and conjecture regarding the fate of one of the banking industry's most notable suppliers, Computer Associates has finally taken over the Newtrend soflw business and sold off all but its prized mainframe software to Electronic Data Systems Corp.
On Friday, Computer Associates bought 6ut the Newtrend Group, an Orlando-based banking systems concern that was the software giant's partner in the Newtrend banking services joint venture formed more than three years ago. As soon as that acquisition was complete, Computer Associates promptly turned around and sold the majority of the business minus its own Infopoint software to EDS, the Plano, Tex.-based outsourcer owned by General Motors Corp.
Pricing on the deals was not disclosed.
EDS will pick up the Miser software, employed primarily by thrifts and savings banks, and the Cube product, aimed at credit unions, as well as Newtrend's substantial service bureau business, which generated more than two-thirds of Newtrend's annual revenue. Under the terms of the deal, EDS also has licensed the right to market the Infopoint software, while Computer Associates will retain control of the product.
This may seem a rather sudden and surprising turn of events for the software and services vendor, which counts more than 1,000 banks as clients. But the relationship always has been rather rocky, albeit fairly lucrative between partners Computer Associates and the Newtrend Group since they founded this business in May, 1991.
Please see the accompanying chart.
"We had been unhappy for sometime with the management of Newtrend," said Mark Combs, the senior vice president of research and development for Computer Associates.
The future for Newtrend has been unclear since July -- when the Newtrend Group announced it was seeking to sell out its 50% stake in the partnership and CA moved to take full control. Last month, officials at EDS admitted they were formally negotiating for a piece of the business.
EDS reportedly has been a suitor for the non Infopoint portion of Newtrend for
many months now. A source close to the dealings said EDS and Computer Associates first broached the Newtrend issue during their discussions for a broadbased software licensing pact, announced in May.
In fact, that alliance put an end to the litigious and long-winded battle between Computer Associates and EDS over license transfer fees --- monies that a customer pays to a software company when it expands the usage of its software. Both companies launched dueling lawsuits over the issue in late 1991 and early 1992, but promptly dropped them -- and the hotly debated issue of the transfer fees -- to sign their 12-year comprehensive contract this year.
But now, the formally feuding Companies said they see this arrangement as one of many extensions of their new-found partnership.
"The service bureau business is not our core business," Mr. Combs said. "In terms of EDS, it was a way to expand that relationship."
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