CONTROL DATA BOARD OF DIRECTORS MAY 4, R. M. Price

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1 NTROL DATA BOARD OF DIRECTORS MAY 4, 1977 R. M. Price GOOD MORNING. ANK WITE ULDN'T BE ERE TODAY SO I GET TE PLEASURE OF GIVING TE DATA SERVICES REPORT. I'M SURE YOU CAN TELL FROM TAT REMARK TAT TE REPORT IS GOOD. DATA SERVICES REVENUES IN TE FIRST QUARTER WERE UP OVER 20% OVER TE FIRST QUARTER LAST YEAR AND ALSO OVER BUDGET. PROFITS WERE -fet MILLI MPARED TO LAST YEAR'S E=5. E OF TE IGLIGTS OF TE FIRST QUARTER WAS TE ANNOUNCEMENT OF A NEW GRAPICS BASED ENGINEERING DESIGN SERVICE CALLED UNISTRUC, FOR UNIVERSAL STRUCTURAL ANALYSIS SERVICE. TERE ARE LOTS OF STATISTICS I ULD GIVE YOU TE PRODUCTIVITY IMPROVEMENTS AVAILABLE TO DESIGN ENGINEERS VIA UNISTRUC, BUT I W'T DWELL TOSE. WAT'S MORE IMPORTANT IS TAT IT IS TE RESULT OF OUR NINE YEAR STRUGGLE TO BRING GRAPICS ENANCEMENT OF DESIGN ENGINEERING INTO PRACTICAL BEING. AND I WANT TO TANK DR. STUTZMAN WO PROVIDED TE ORIGINAL INSPIRATI AS WELL AS LOTS OF SUPPORT AND PRODDING OVER TESE MANY YEARS. WITOUT IS DETERMINATI I'M SURE WE WOULD AVE FALTERED. WEN YOU SEE UNISTRUC IN ACTI YOU'LL REALIZE JUST OW INDEBTED WE ARE TO LEROY STUTZMAN FOR A MAJOR NEW SERVICES OFFERING.

2 Control Data Board of Directors May 4, 1977 Page 2 ANOTER IGLIGT OF TE FIRST QUARTER IS TE IMPROVEMENT IN EUROPE DATA SERVICES. REVENUES UP BY OVER 25% OVER LAST YEAR AND A TOO TOUSAND DOLLAR PROFIT IMPROVEMENT FROM LAST YEAR "35 /LOSS OF 700K. TE OTER AND I STILL AM NOT SATISFIED TAT OUR DATA SERVICES PROGRAM IS EITER SOLID ENOUG OR AGGRESSIVE ENOUG IN EUROPE BUT TE PROGRESS IS GRATIFYING AND WE'RE NTINUING TO WORK TE PROBLEM. IN TE OPERATIS AREA OUR PROGRAM OF NTINUED NSOLIDATI IS MAKING GOOD PROGRESS. BOT BOST AND NEW YORK AFTER A YEAR'S PLANNING WILL BE INTEGRATED INTO TE EASTERN CLUSTER CENTER BY TE END OF TE SUMMER. AND NOW OPERATING SYSTEM VERSIS FOR BOT TIME SARING AND BATC ARE FULLY OPERATIAL WORLD-WIDE. TE REACTI WIT A FEW MINOR RIPPLES TO TE PRICE INCREASES AS BEEN POSITIVE - TAT IS IT AS NOT CAUSED ANY CUSTOMER MMOTI AND OF URSE TE EFFECTS WILL LY FULLY BE FELT IN TE SEND QUARTER - SO TAT BODES WELL FOR TE REST OF TE YEAR. NOW LET ME TURN TO TE CARTS.

3 REVENUE B U D G E T A C T U A L D E V I AT I O N N E T W O R K A P P L I C A T I O N S S B C E D U C A T I O N (. 4 ) P S D E N G I N E E R I N G ifetwork^revenue is favorable to budget due primarily to U.S. CYBERNET t^($1.4m) and West Europe ($.3M). Amplications is $.9M favorable to budget due largely to ARB ($.4M) ^and Automated Wagering ($.6M). PA #'s started 1 month earlier than budgeted, SBCfs revenue is over budget due to increes in IBM and Customer Services revenue. Educations revenue is $.4M unfavorable to budget due to CBE. Projections are for this variance to get wider throughout the year. Engineering's first quarter revenues were higher than budget due primarily to improved performances in West Europe ($1.7M), U.S. ($1.0M), Et Europe ($.4M) and Pan Am ($.3M). M o ^ ^ -

4 111 R M Price CDC speeches Charles Babbage Institute GROSS PROFIT NETWORK APPLICATIS SBC EDUCATI PSD ENGINEERING BUDGET ACTUAL DEVIATI (. 7 ) Network's improved first quarter gross profit numbers are due mainly L/to the incree in revenues in U.S. CYBERNET and West Europe. Application's favorable gross profit is due to Automated Wagering ($ 2M) -improved revenues, and Ticketing Administration's reduced cost-of sales expense. SBC's improved gross profit is due primarily to improved revenues. PSD is unfavorable to budget due to the result of accounting treatment of International variances ($.4M) and unfavorable results of ($.4M) primarily in the Southet region within U.S. Operations. Engineering's favorable position is due to the improved revenue performance in West Europe, U.S., Et Europe and Pan Am. \ ^ 2 - ""ft-*-*- «Cv. cr> ^- M 'ft*-*./w-v^w--

5 EXPENSES BUDGET ACTUAL DEVIATI NETWORK APPLICATIS SBC EDUCATI PSD ENGINEERING (. 1 ) L~4' ^ Network's expenses are $.4M less than budget due primarily to interest expense rate adjustment made in the first quarter for all of Data Services. (L»J! SBC is $.2M under budget in expenses due to Marketing Expense where T/S is 20 people under budget. Education is favorable to budget all in CBE. This is the result of holding expenses down due to lower revenues. PSD's expenses are $.3M favorable to budget due to a reduction in the PSD advertising program, IAT Direct Mail program, USSR Seminar Marketing and Division Bid/Proposal expenses. Eagineering is the only Services Product Family over budget in expenses. This is due to higher commissions on increed revenue and unfavorable translation impact on G&A in West Europe. c$~ ( ^ - 4 > - - L» - i. t ' ^-c^-*-»-c M e s > i *. i, c > ^

6 ii l R M Price CDC speeches Charles Babbage Institute NET PROFIT BUDGET ACTUAL DEVIATI NETWORK APPLICATIS SBC EDUCATI PSD ENGINEERING (1.2) (1.3) (. 8 ) (1.8) (1.0) (. 4 ) (. 1 ) Network is ^ftjjf favorable to budget due to U.S. CYBERNET ($1.2M), L^tfest Europe ($.4M) and ($.4M) of reduced interest expense. /^Applications is favorable to budget due to IS ($.2M) - slower./^\r R&D start-up, T/A ($.2M) and Automated Wagering ($.1M). \LZ- */i&c is favorable to budget by $1.3M due to higher revenue levels plus lower marketing expense. ^ -" I^E^ucation is. $.8M favorable to budget due primarily to CBE's reduced expenses and Iran's improved performance. \/PSD is $.4M unfavorable due to the accounting for International burden variance. ^Engineering's $.6M of favorable net profit is due to the higher revenue levels for the 1st quarter of 1977.

7 ASSETS BUDGET ACTUAL DEVIATI NETWORK (2.6) APPLICATIS SBC EDUCATI PSD ENGINEERING ^ ^ ^ ^ ^ ^ i ^ k + ~ U J U j J ^ A ^ t i * * / g * + J & * > J L h U ^ Network is over budget in sets due mainly to receivables. U.S. CYBERNET I ^ s^$2.4m over $1.8M due to higher revenues and $.6M due to ch \*rcollection inefficiencies, West Europe is $3.2M unfavorable $2.2M of which is due to ch collection inefficiencies. Other set categories are under budget Data^ent^r-~E^tti-praen --$2^M^u^-t>-d^ of ^mi.i^etttr-=«^offpwat:er allocated sets are $l.^m^urider~hudget. u>«zwx ^^fx v ^Applications is $2.0M favorable to budget dne-^^mbes^y^t^y^^s^aiid Automated'Wagering terminals ($1.2M) and 'Receivables aire favorable dt S&E ($.4M) and ARB ($.3M). SBC is favorable" to budget by $6.4M-due primarily to Receivables ($1.7M) - ch cojj^ction efficiencies, Data Center Equipment ($3.1M) -"Sue to leing of FOCUS machines vs. buying, and the delay in the purche of other budget equipment. 'f\i5m^favoraple to budget wkieh is primarily due to U.S. receivables.. ^Engineering is $6.1M favorable to budget, most of which is in the U.S. V^ Inventory is $3.9M favorable, initial spares $1.1M and PP&E $.9M.

8 Control Data Board of Directors May 4, 1977 Page 3 SO IN SUMMARY, SO FAR SO GOOD. WE NEED TO WORK ARDER AT EXPENSES - ESPECIALLY ADMINISTRATIVE EXPENSE. WE AVE SOME PROBLEM AREAS. BUT OUR PROJECTI FOR TE YEAR LOOKS REASABLY GOOD, BUDGETED PROFIT LOOKS LIKE A SOLID GOAL, WE AVE RAISED TE PROFIT PROJECTI CURRENTLY TO BE BETTER TAN BUDGET. WIT A LITTLE LUCK AND A LOT OF WORK WE SOULD BE ABLE TO MAKE TAT PROJECTI. amblo

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14 AGENDA FOR MEETING OF TE BOARD OF DIRECTORS OF NTROL DATA RPORATI APR 2? 1977 Wednesday, May 4, ;00 A.M. Registry otel - Room th Avenue South Bloomington, Minnesota I. Regular Meeting 1. Approval of Prior Minutes R. B. awkins (5) Board of Directors 1/14/77; 3/7/77 Executive Committee 2/21/77 Retirement Committee 1/12/77 Audit Committee 1/13/77; 3/17/77 C h a i r m a n ' s C o m m e n t s W. C. N o r r i s Consolidated Financial Summary B. R. Eng Review of Talk to Stockholders Meeting W. C. Norris (30) (10) (10) 5. Computer Business Operations Reports Systems Data Services Marketing Peripheral Products J. V. Titsworth R. M. Price V. E. Sieling T. G. Kamp (10) (10) (10) (10) 6. CCC Operations Report P. G. Miller (10) 7. Declaration of Preferred Stock Dividend R. B. awkins (5) 8. Report on Overse Meeting including CTI W. C. Norris (15) 9. Secretarial Matters II. Annual Meeting 1. Appointment of Committees of the Board R. B. awkins R. B. awkins (5) (5) Executive Committee Stock Option Committee Compensation and Incentives Award Committee Election of Officers Executive Session