CPQ/NETWORKINT article #2 (see BOLD).
This article deals with CPQ/TANDEM, but is interesting...
6/24/97 Dow Jones News Serv. 00:00:00
Dow Jones News Service-Wall Street Journal Stories
Copyright (c) 1997, Dow Jones & Company, Inc.
Tuesday, June 24, 1997
Compaq To Acquire Tandem Computers
By Wall Street Journal Staff Reporters
Evan Ramstad in Dallas
And Lee Gomes in San Francisco
Compaq Computer Corp., moving beyond the personal-computer industry, agreed
to pay $3 billion in stock to buy Tandem Computers Inc., a maker of complex
systems prized for never shutting down.
The deal is a major step in Compaq's goal of transforming itself into a top
supplier of computers at every level of sophistication and power. Analysts
noted that Compaq, the world's largest maker of PCs, still lacks some products
and services of bigger rivals but, by using stock instead of cash to acquire
Tandem, it preserves its flexibility to buy others.
"There's a perception out there that Compaq is just a PC company, but you see
them building on all fronts," said Andrew Neff, analyst at Bear, Stearns & Co.
In the past two years, Compaq has spent about $600 million to acquire three
manufacturers whose equipment connect PCs in networks. Tandem, for the first
time, would provide Compaq with systems that are completely different from PCs,
advanced computers used by telephone companies and stock exchanges that value
their reliability.
In addition to Tandem's products, Compaq would pick up a 4,000-member sales
force with access to customers, particularly big companies, that it wants to
reach directly. And it gets a chance to more deeply apply Tandem's technology
for putting several computers together to act as one system, a technique known
as "clustering." A 1995 agreement gave Compaq some access to Tandem's
technology.
Compaq said it would issue about 29 million new shares for Tandem, exchanging
0.21 share of its stock for each Tandem share, valuing them at $22 each. Compaq
currently has 284 million shares outstanding.
Tandem shares jumped $5.75, or 38%, to $20.75 in very heavy New York Stock
Exchange composite trading. Compaq shares fell $2.875 to $103.875.
The acquisition would boost Compaq's goal of reaching $40 billion in annual
sales in 2000. With $18 billion in sales last year, the Houston-based company
needs to grow 23% a year to reach that target. But sales rose only 15% in the
first quarter as demand for PCs fell. Tandem, of Cupertino, Calif., would add
about $2 billion in revenue this year, equal to about 11% of Compaq's 1996
sales. [GCK: ASND, with revenues increasing
close to 40% annually, would make a nice
dent as well]
Tandem's main attraction, however, is its sales force. Compaq, which relies
mainly on dealers to sell its systems, needs better relationships with big
customers to fulfill its ambition of being a leading technology provider like
International Business Machines Corp., Hewlett-Packard Co. and Sun Microsystems
Inc.
In addition, said Eckhard Pfeiffer, Compaq's chief executive officer,
Tandem's consulting and services operations "will bring us to the [negotiating]
table in situations where previously we were not." [GCK: Like,
say, with NTT?]
Compaq earlier this year said it would hire about 2,000 people to add to its
sales group of 4,000. Mr. Pfeiffer said it will proceed with that plan along
with the addition of the Tandem sales force.
As a result of the transaction, Compaq will halt a stock-repurchase program
authorized two months ago. Executives structured the Tandem purchase as a tax-
free "pooling of interests" and said they expected it would immediately add to
Compaq's financial results.
Tandem's sales have been stagnant at around $2 billion for seven years and
its profit gains have been spotty since it shed its reliance on proprietary
hardware and software designs in 1993. Tandem will benefit from Compaq's
purchasing power with component suppliers and the PC company's recent success
in managing assets and inventory, said Earl Mason, Compaq's chief financial
officer.
(END) DOW JONES NEWS 06-24-97
0 00 AM
---- INDEX REFERENCES ----
COMPANY (TICKER): COMPAQ COMPUTER CORP.; TANDEM COMPUTERS INC. (CPQ TDM)
NEWS SUBJECT: Buybacks; CEO Interviews; High-Yield Issuers; Labor,
Personnel Issues; Acquisitions, Mergers & Takeovers; World
Equity Index (BBK CEO HIY LAB TNM WEI)
MARKET SECTOR: Technology (TEC TPX)
INDUSTRY: Computer Makers; Computers (CPM CPR)
PRODUCT: Computer Hardware (DCO)
REGION: California; North America; Pacific Rim; Texas; United
States; Southern U.S.; Western U.S. (CA NME PRM TX US USS
USW)
Word Count: 587
6/24/97 DJNS 00:00:00
END OF DOCUMENT |
