Another take on the CPQ/DEC deal and effects on Intel
Compaq's DEC Buy Clouds Alpha Picture
(01/26/98; 8:39 p.m. EST)
By Mark Hachman, Electronic Buyers' News
Although Compaq Computer's acquisition of Digital
Equipment creates a computer systems powerhouse,
the deal also raises questions of Compaq's future in
the chip business.
Included in Compaq's $9.6 billion acquisition is
Digital's Alpha microprocessor, which was licensed to
Intel in an agreement to settle outstanding litigation
between the two companies. That settlement is
reportedly under investigation by the Federal Trade
Commission, which is also reviewing Intel's influence
as a manufacturer of PC components.
Compaq and Digital executives were unavailable for
comment regarding the future of the Alpha chip.
However, in an interview with Dow Jones News
Service, Compaq CEO Eckhard Pfeiffer said his
company would continue to invest in Alpha, along with
software initiatives such as Digital's Unix operating
system.
Last year, Intel purchased Digital's manufacturing
operations for $700 million. As part of that deal, Intel
also licensed the Alpha patents and agreed to
manufacture the processor for "multiple product
generations."
The Compaq buyout raises several new questions,
said Linley Gwennap, an analyst with MicroDesign
Resources in Sunnyvale, Calif. "Can Compaq
renegotiate the deal?" he asked. "More importantly,
does it want to?"
A spokeswoman for Digital Semiconductor, in
Hudson, Mass., would state only that "Alpha is full
steam ahead. I don't believe that the [deal] is being
negotiated, as it was part of the settlement process."
When asked if the Compaq-Digital deal means the
Digital-Intel settlement remains in place, an Intel
spokesman responded: "We believe it does, we are
proceeding as if it does, but we don't know one way
or the other."
Executives at Samsung Semiconductor America, San
Jose, Calif., said they too expect Alpha will be
embraced by Compaq, rather than discarded.
"Alpha has failed not from a technology standpoint,
but from the marketing side," said Y.J. Kim, Alpha
marketing manager at Samsung. "In the process of
moving their servers to Merced, I think Compaq
realized that something was missing, and that was
Alpha."
Regarding Intel's role in the marketplace, legal experts
said they believe the Compaq acquisition will be
viewed favorably by the FTC. Like the investigation
into Microsoft by the Department of Justice, the
FTC's investigation of Intel will concentrate less on
Intel's established dominance of the microprocessor
industry and more on other markets.
Compaq will likely use the Alpha architecture to
separate itself from Intel, as it has done with the
purchase of processors from Advanced Micro
Devices, said Mark Ostrau, partner with Fenwick &
West, Palo Alto, Calif., who specializes in cases
involving anticompetitive practices.
"Compaq has been making a number of moves to
avoid being completely beholden to Intel," Ostrau
said. "That should be viewed favorably by the FTC.
Digital, on its own, was not really succeeding with
Alpha. You could make the argument that with the
Compaq deal, at least Alpha's still alive, as a
competitor to Intel."
Other analysts agreed that Compaq would likely use
the Alpha chip to differentiate itself from its
competition, just as Hewlett-Packard and IBM have
done with their PA-RISC and Power chip
architectures.
"The Alpha architecture may have more opportunities
in giving Compaq experience in high-end systems,"
said Nathan Brookwood, microprocessor analyst with
Dataquest, in San Jose Calif. Tandem Computers, a
server manufacturer Compaq recently acquired for $4
billion, would likely consider moving its
MIPS-based servers to the Alpha architecture, he
said.
However, Gwennap expects a far different outcome.
Considering Digital and Compaq's previously stated
plans to move their servers to 64-bit Intel processors,
the deal "will likely accelerate the demise of the Alpha
architecture," he predicted. |
