The big deal: Compaq swallows Digital

The big deal: Compaq swallows Digital

In the biggest acquisition in the history of the computer industry, Compaq has acquired Digital for $US9.6 billion.

The deal makes Compaq the second-biggest computer maker in the world, behind only IBM. The combined company will create what Compaq claims is the largest channel network in the world, delivering over 80 per cent of its products and solutions.

By the time the takeover is completed (expected to be by the end of the second quarter) Digital will be a wholly-owned subsidiary of Compaq, although both brand names are expected to continue, at least in the short term. Where the two companies' product lines overlap, such as in notebook computers, it remains unclear what the outcome will be.

By acquiring Digital, Compaq gains a foothold in the enterprise market which it would otherwise have found difficult to build. It also gets access to Digital's 64-bit Alpha technology, OpenVMS, Digital Unix and Windows NT enterprise systems.

It's in the air

Locally, both companies are scrambling to understand the implications. According to Paul O'Connor, Digital's director of products and channels, "the engagement has been announced and we're just waiting for the wedding".

He said even though the announcement has been made, it will be four to six months until the Digital/Compaq deal is ratified. So until then, it seems confusion will reign supreme. The intimate details have yet to be determined, but already there's been a lot of conjecture about what's going on.

O'Connor said Digital will maintain its business service centre, which has the worldwide service contract for Compaq machines. He said Compaq resellers will gain more products, and Digital will benefit from Compaq's financial stability.

"All channel partners can see it's going to be a positive thing," he said.

Laurie Sellers, general manager of i.t.conneXions, said he can't see a downside to the deal. But he said nobody knows what's going to happen.

Shake-up to come

Sellers believes there will be a shake-out at both companies at some stage, probably within a year. He likened the deal to the Fujitsu/ICL merger, where Fujitsu took over Australian operations for ICL.

Sellers said the Australian market isn't large enough to sustain both Compaq and Digital.

Ace Software director Allen Cupitt said the situation is "like a guppy swallowing a whale". He said the channel's perception of the situation is fairly calm, and there is no point in panicking, at least not yet.

One area where this could happen is services. According to John Grant, the managing director at Queensland reseller and services provider Data#3, Compaq's acquisition of Digital's services arm "gives them a new point of entry to the market as a very serious services player".

Grant suggested local resellers should benefit from the buyout given both Compaq and Digital's preference for the indirect model.

"Only last month, Compaq reconfirmed the reseller model as its preferred strategy, while Digital has also recently reinforced this model as the preferred means of taking its product to market.

Greg Healey, the director of Compaq's commercial division, said that the Digital deal meant that Compaq was entering the next stage of a process that it had been undergoing for the past few years.

Feedback from resellers had been positive. "The more Compaq expands, the better that looks for our resellers. As we grow we gain more opportunities, and those opportunities are bound to flow through to the channel", said Healey.

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