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To: Gary Korn who wrote (24707)	11/26/1997 12:05:00 AM
From: Gary Korn	Read Replies (2) \| Respond to of 61433

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

To: Gary Korn who wrote (24707)	11/26/1997 12:11:00 AM
From: Gary Korn	Respond to of 61433

CPQ/NETWORKING article #3 (note BOLD sections): 9/16/96 New Straits Times 36 1996 WL 12284903 The New Straits Times Copyright 1996 Monday, September 16, 1996 Comment & Analysis Industry watch Everything's connected Lim Chong WHAT a busy time this has been for the networking industry. The past weeks have seen Cisco and Bay Networks back on the acquisition trail and Robert Frankenberg resigning as Novell's chairman and chief executive officer. The industry is going through a consolidation phase and according to analysts, further takeovers and mergers can be expected. "The market is moving too fast to miss an opportunity," Cisco's chief executive officer John Chambers was quoted as saying. Businesses are busy putting up networks and they are increasingly seeking a full array of technology from a single vendor to avoid confusion and hassle. The network equipment market is estimated to be growing at around 30 to 35 per cent annually. Over the next five years the market could offer up to US$100 billion (RM250 billion) of growth opportunities, according to 3Com executive vice president Bob Finocchio. With the new preference for one-stop shopping, networking companies have little choice but to build up their technology products and support services in order to do well. Not surprisingly, the drive towards multi- function products has led to market consolidation. The networking companies either invest in or acquire other companies for technologies they cannot develop on their own. It's usually the bigger companies swallowing the smaller ones so long as they are able to fit a part of the technology jigsaw. As the giants grow bigger, it will be more difficult for new entrants to make an impact in the marketplace. Only the strong will survive. Is networking the industry of the future? Even personal computer (PC) giant Compaq is going into the networking market. with server products. To come up with its own network solutions, Compaq spent more than US$400 million to acquire networking companies Thomas Conrad and Networth. Most mergers have been based on technology fit, and the largest was that of router specialist Wellfleet and switching proponent SynOptics to form Bay Networks. Bay, going through a painful period of consolidation, was itself recently reported to be a target of takeover. There have been speculations of IBM showing a little interest. To flex its muscles and showing that it's still in the game, Bay recently announced that it was buying LANCity in order to provide virtual private networks (VPNs) as well as end-to-end networking with "edge connectivity" to all access technologies. When it comes to takeovers in the networking industry, it's hard to ignore the achievements of Cisco, even when one wants to. Recently in its fifth acquisition so far this year, the company made its opening move in the Gigabit Ethernet market by acquiring Granite Systems for US$220 million in stock. Cisco acquired the company's multilayer Gigabit Ethernet switching technology, regarded as a new and potentially powerful option for backbone network transport switching. Gigabit Ethernet, designed to move data at the rate of one billion bits per second, has been gaining a lot of attention lately and may be the centre of attraction at Networld-Interop in Atlanta this month. Though there is still no interoperability standard a number of companies have already announced their plans to roll out products. According to Dataquest, the Gigabit Ethernet market is projected to grow from US$73 milllion next year to become an almost US$3 billion market by the year 2000. Too big an opportunity for Cisco to miss. In fact, Cisco and Granite are two of the founding members of the Gigabit Ethernet Alliance which is made up of more than 60 networking and computer companies with the aim of providing an open and cost-effective Gigabit Ethernet standard. Designed to run over either fibre-optic or copper cabling, Gigabit Ethernet may prove to be most widely supported ultrafast network, and therefore the least expensive. Still, the game has just begun. ---- INDEX REFERENCES ---- REGION: Malaysia; Pacific Rim; Far East (MY PRM FE) EDITION: COMPUTIMES; 2* Word Count: 621 9/16/96 NEWST 36 END OF DOCUMENT

To: Gary Korn who wrote (24707)	11/26/1997 12:15:00 AM
From: Gary Korn	Read Replies (1) \| Respond to of 61433

CPQ/NETWORKING article #4 (see BOLD): 10/27/97 InformationWeek 146 1997 WL 14148537 InformationWeek Copyright 1997 CMP Publications Inc. Monday, October 27, 1997 654 Columnist Taking Stock Compaq Keeps Moving -- Recent acquisitions have added depth to the PC maker's product and service offerings, and reengineering has paid off Besides being the largest PC company in the world, Compaq Computer is extremely well run-unlike some other PC companies with fruit hanging on them (read:Apple). The PC industry has always been known for its volatility. Fickle customer demand is always the unknown factor, and old inventory is a perpetual headache in new product cycles. Many one-time charges to financial statements are the norm. Companies like Compaq show that a new PC business model has come to town. The model delivers timely, cost-effective new products, makes profitable acquisitions that benefit shareholders, and executes at all levels from manufacturing to marketing. This did not happen overnight. Interestingly, Compaq was slow to go the build-to-order (BTO) manufacturing and optimized distribution route that was so lucrative for Dell Computer. But now Compaq seems to be aggressively playing catch-up and gaining market share. By mid-1998, Compaq should have most of its desktop production based on BTO manufacturing. This will let the company compete more aggressively for market share and still maintain gross and operating margins at current levels. Unit volume growth in the latest quarter was definitely boosted by demand for the low-priced desktop PC. But despite all the fuss over the $1,000 machine, it was server sales that caught my eye. As IS managers expand their network environments, demand for Compaq's broad range of enterprise servers and associated desktop PCs will grow. The combination of service and quality has always been a trademark of Compaq in the corporate market. But IS managers should note that Compaq is not standing still. Recent acquisitions like Tandem and Microcom have expanded the depth of Compaq's products and services to encompass servers, networking, and workstations, as well as desktop PCs. This was obviously not intended to address the consumer market. It would not be surprising, given the more than $6 billion in cash on Compaq's balance sheet, to see the company continue on the acquisition trail in 1998. Again, most of the new acquisitions are likely to be directed toward the corporate market, which should please IS managers. Besides the manufacturing reengineering, Compaq is benefiting greatly from financial restructuring. Management has targeted U.S. channel inventory to be a maximum of two weeks by year's end. It also aims to improve inventory turnover to 30 times a year by 1998. These changes should have a meaningful impact on operating margins. Compaq is also taking advantage of the tax-loss carry-forwards from the Tandem acquisition, which has helped it reduce the current average tax rate. The biggest near-term risks are the uncertainty of continued PC demand and the margin pressures caused by the low-end consumer PC market. Also, highly profitable segments like notebooks have clearly gotten more competitive. Compaq's notebook segment is seeing formidable challenges from Dell, Gateway 2000, IBM, and Toshiba. Financially, Compaq could not be in much better shape, with no long-term debt. Revenue in the latest quarter was $6.47 billion, up 31% over the same period last year. Gross margins were a healthy 27.4%, producing earnings-per-share growth of 40% over last year. Compaq produces a return on invested capital over 60% and just recently started its first dividend. With so much cash on its balance sheet and large cash-flow generation from operations, I expect major share buyback programs will be implemented in the latter part of 1998 once restrictions are lifted due to the Tandem acquisition. I estimate that fiscal 1997 earnings will be about $2.65, growing to $3.35 in 1998. With the current share-price/earnings-per-share ratio at 22 times my 1998 estimate, Compaq cannot be called a value play, but it is worth a premium. William Schaff is chief investment officer at Bay Isle Financial Corp. in San Francisco, which manages the InformationWeek 100 Stock Index. You can reach him at bschaff@bayisle.com. ---- INDEX REFERENCES ---- COMPANY (TICKER): Compaq Computer Corp. (CPQ) NEWS SUBJECT: World Equity Index (WEI) INDUSTRY: Computer Makers; Computers (CPM CPR) Word Count: 624 10/27/97 INFWK 146 END OF DOCUMENT