Analyst Lowers Control Data Profit Estimate : Hutton Recommends Selling Company’s Stock

Control Data Corp. continued to feel the growing slump in the computer industry and the spreading effect of the Ohio banking crisis as E. F. Hutton Group on Tuesday sharply lowered quarterly profit estimates for the Minneapolis-based computer giant and recommended that investors sell their stock in the concern.

E. F. Hutton analyst Michael J. Geran lowered expected per-share earnings for Control Data to 5 cents from 40 cents for the first quarter, which ends March 31.

Control Data had no comment. Its stock closed at $31 a share Tuesday, down $1, on the New York Stock Exchange.

Geran said he made his decision because growth in wholesale orders for Control Data’s minicomputer add-ons had dropped to “zero percent in the current quarter from 20%” last quarter.

Slowdown in Economy

The drop reflects a decrease in orders from computer makers such as Data General and Digital Equipment, which add the components to the mid-size computers that they then sell in retail markets.

The decrease, in turn, reflects a slowdown in the U.S. economy as well as a slowdown in mid-size computers as companies hold off on major purchases in anticipation of new products, Geran and other analysts agreed.

Geran also said that City Loan & Savings Co., a subsidiary of Control Data and the largest of Ohio’s privately insured savings institutions, is itself stable. Nevertheless, it stands to lose a substantial portion of the $17 million that it contributed to the state’s deposit insurance fund, he said.

Ohio officials said in an unrelated announcement Tuesday that Lima, Ohio-based City Loan & Savings will be allowed to open for regular business today. The thrift was among the 70 institutions closed by Ohio Gov. Richard F. Celeste last week when the state’s insurance fund appeared to be depleted by the failure of Cincinnati-based Home State Savings Bank.

$5 Billion in Revenue

Computer add-ons accounted for $1.54 billion of Control Data’s 1984 sales of $5 billion, while other computer sales accounted for $2.22 billion. The company’s commercial credit subsidiary, which includes City Loan & Savings, accounted for about $1.2 billion of the company’s revenue.

Geran said an increase in Japanese imports, which have been pushed up sharply by the strong U.S. dollar, also was a factor in his decision to lower the earnings estimate.

Other brokerage houses are divided in their opinions of Control Data. George J. Podrasky of Duff & Phelps Inc. in Chicago said he had put the stock on the “don’t buy” list last November, when Control Data said it would try to sell its financial subsidiary and use the money to buy back its stock in the open market.

Podrasky said the company’s announcement boosted its stock to the current low- to mid-$30 range from a mid-$20 range. He reasoned that Control Data’s stock is overvalued at that price, because he believes that the company will have a hard time selling its financial subsidiary, especially after the recent crisis in Ohio.

Merrill Lynch, Pierce, Fenner & Smith in Los Angeles continued to recommend that investors buy Control Data stock. And Paine Webber Mitchell Hutchins in Los Angeles said it is neutral, recommending neither a buy nor a sell.