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Technology Stocks : Compaq

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To: Andreas who wrote (84689)9/11/2000 8:43:17 PM
From: Piotr Koziol  Read Replies (1) of 97611
 
Coming out of the tech shadows
September 12, 2000
by Jerry Borrell

In the heart of Palo Alto's most trendy addresses, you can find one of the computer industry's best-kept secrets, Compaq
Computer's (CPQ) corporate research center. Actually, the University Avenue address is headquarters to three laboratories
that make up Compaq Research: The Western Research Laboratory, The Systems Research Laboratory and The
Cambridge Research Laboratory.

What, you ask, is a Houston-based PC maker doing with these kind of research facilities? For the answer, one needs to
remember the acquisition of Digital Equipment and Tandem Computers -- purchases most of us have already forgotten.
The nearly 200 researchers and academics in Compaq's research groups, however, have not. Their pedigrees and
experience have been submerged in the quiet but substantive reorganization of Compaq by Michael Capellas. (See: "Q&A:
Compaq CEO likes healthy competition.")

It took a while for me to readjust my thinking about this former leader of the PC-industry innovation, despite its having
produced one of the first personal computers that I ever used (in 1981).

After visits to both Houston and Palo Alto, it is clear that this superficially somnolent giant has been hard at work the past
few years. In June of this year, I previewed a host of new products and technology that the company will launch during the
Christmas season, not knowing that much of what I was looking at, and the repositioning of Compaq, was derived in part
from the work of the scientists at its three research facilities.

The goal of the groups, according to Bob Iannucci, vice president of corporate research (an alumnus from IBM (IBM) and
MIT), is focused on the rapid commercialization of technology that the labs' scientists have conceived. The best example to
date is the development of the Web-indexing technology that led Digital to found AltaVista, which Compaq later sold to
CMGI (CMGI) for $2.5 billion. Or Digital's founding of the Palo Alto Internet Exchange, later sold to AboveNet for $75
million.

Beyond these two little-publicized examples are a host of other technologies, including: semiconductor design, storage
technology, networking, user interface, databases, multimedia, operating systems and many more.

Product announcements are set to bring the labs notoriety. Current research into Internet indexing, for example, promises to
do for multimedia what AltaVista did for text search. An internal design project, known as Itsy, gave shape to Compaq's
recent iPAQ product announcements.

Compaq's aim in the handheld market is to replace Palm (PALM) as the market leader. And if the iPAQ won't do it, the
second-generation iPAQ has features and functions that will speak mightily to those enamored of gadgets. Palm may have
the lead in this market, but Compaq brings $40 billion-plus of marketing clout.

In another fast-paced arena -- MP3 personal music players -- Compaq produces, under a third-party label, the Personal
Jukebox, a high-end, 6-gigabyte device capable of storing and editing 125 audio CDs -- some 1,500 music tracks -- at
128-bit sound quality.

The second generation will store significantly more at half the size and weight, rivaling the current generation of tiny MP3
players. Related to handheld electronics, Compaq's researchers support their Open Handheld Program -- a significant effort
to support Linux as the operating system of choice for handheld and wireless information appliances.

Nor has the former Digital staff forgotten or abandoned its heritage in processor and system architecture; hence its Piranha
Project, the lab's research effort to move a series of eight simple Alpha processors onto a single CPU chip, together with a
simultaneous effort to modify its version of real-time Unix operating systems for use in the processor package.

Not to be outdone, the systems research group is moving some of its esoteric research in scalable systems and Java
development into the commercial realm as well, hoping for another AltaVista-like success.

Now that Compaq is talking, it's clear that it once again has something to say.


Jerry Borrell is editor in chief of UPSIDE magazine.
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