Deal Puts Compaq In Global League

Compaq Computers ambitions know few bounds. With the acquisition of TandemComputers, the personal computer industry leader aims to leapfrog much larger companies to become the world leader in all types of open systems computers.

Already, Compaq has become a formidable competitor to some of the worlds biggest computer companies such as International Business Machines, Hewlett-Packard and Digital Equipment. Building on its strong base in personal computers, Compaq has become the runaway leader in so-called PC servers, computers that are widely used in office networks. Recently, Compaq also launched an attack on the workstation market with products that match the performance, at much lower prices, of workstations from Sun Microsystems and Hewlett-Packard.

 

With the Tandem acquisition, Compaq will extend its product range into high performance servers, sometimes known as mainframe alternative computers. This will enable it to compete at almost every level of computer power, with the worlds biggest computer companies.

Compaq already ranks among the largest sellers of computer hardware, with revenues last year of $18.1 billion, the vast majority of it from computer sales. By comparison, Digital Equipments total revenues of $14.6 billion last year included a large services operation.

Compaq also claims to have overtaken Hewlett-Packard, the second largest US computer company, in terms of computer sales.

International Business Machines, with 1996 revenues of $80 billion, is much bigger, but it too has large services and software operations.

The combination of Compaq and Tandem is a perfect match, Eckhard Pfeiffer, Compaq chief executive, said on Monday. Compaq will be able to offer its customers a one-stop shop for all types of computers, he said.

Tandem is best known for its fault-tolerant computers - systems that continue running in spite of component failures. Recently, however, Tandem has overhauled its product lines and refocused its strategy to concentrate on high performance, secure online transaction systems based on industry standard Intel chips and Microsoft software.

This will double the size of the market we address, said Mr Pfeiffer.

Tandem will also bring to Compaq many of the things the company needs if it is to achieve its ambition to become one of the worlds top computer suppliers.

The size of Compaqs sales force will double overnight to about 8,000 people, enabling the company to address broader markets.

Tandems expertise in system software will also be an important addition to Compaqs arsenal.

The purchase will immediately add to Compaqs revenues, the company said.

Tandem will, however, have to realign its operating system software strategy to focus on Windows NT. Until now it has also offered Unix systems. Windows NT, Microsofts server operating system, is gaining incredible momentum said Pfeiffer. Compaq enters the high-end server market as the most powerful company to market Windows NT systems, he claimed.

Reviewing the competitive landscape, Pfeiffer said that Digital Equipment, which claims to be the leading supplier of Windows NT servers, was faltering due to its legal battles with Intel, the microprocessor manufacturer. Digital also faces the challenge of maintaining the momentum of its Alpha products built using its own proprietary microprocessors.

Hewlett-Packard, while stronger, has only recently begun to embrace the Windows NT operating system for high performance servers, with most of its products running the Unix operating system. While HP is working with Intel on the development of a new generation of high performance microprocessors, Compaq, as Intels largest customer, will also be closely involved, Pfeiffer said.

As the companies combine operations, Tandem will retain its name and be known as a Compaq company. Tandems Roel Pieper will remain chief executive of the subsidiary and report to Pfeiffer.

Compaqs acquisition of Tandem also brings together two of the veterans of the US venture capital community; Ben Rosen, chairman of Compaq and Tom Perkins, chairman of Tandem, who will join Compaqs board.

Financial Times

AT PRESENT

Compaq: Sales (1996): $18.1 billion

Tandem: Sales(1996): $1.9 billion

AFTER DEAL

The combined entity is projected to be the worlds largest manufacturer of computers based on Intel chips and Microsoft software, surpassing IBM