Burroughs is selling a sizable portion of Memorex, the struggling disk drive and computer peripherals business it bought five years ago, to an international group of Memorex executives and New York financier Eli S. Jacobs for $550 million, the company said Thursday.
The sale fits with Burroughs' stated plan to sell at least $1.5 billion in assets to help pay the debt it incurred in its $4.8-billion acquisition of Sperry earlier this year. The Memorex price will be paid "largely in cash," the company said, with Burroughs taking an unspecified amount of preferred stock in the new company.
Analysts generally reacted positively to the announcement, some indicating that the price was better than expected. Burroughs purchased Memorex in 1981 for $117 million and has made large cash infusions to support heavy research and development costs, primarily associated with the large disk drive business. Burroughs is keeping that business for its computer systems and eventually for Sperry's.
Memorex lost money in 1985, and analysts say it is nearing break-even this year and was headed for profitability in 1987. The slowness of the large disk drive operations to match International Business Machines product improvements has been blamed for the subsidiary's losses. A spokesman for Memorex said the divisions being bought by the new company are profitable.