Sorry if this has already been posted. I found this at
techweb.com
Does anybody know how accurate this is?
April 27, 1998, TechWeb News
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Key Is To Keep Momentum -- Compaq Races To Bring Digital Into The Fold
By Joe Wilcox
Houston -- While Compaq Computer Corp. has publicly battled inventory problems, integration teams have quietly worked around the clock to bring Compaq and Digital Equipment Corp. together.
Some said the deal could close as early as this week. Following Federal Trade Commission approval, Compaq is planning layoffs at Digital, Tandem Computers Inc. and Compaq with a number as high as 20,000 people, sources said.
Compaq, Houston, also plans to expand its presence in Digital's Maynard, Mass., facility and aggressively campaign Alpha as a server alternative, said sources close to both companies.
Meanwhile, channel conflict with Digital's service division will be carefully monitored.
"Compaq does recognize that Digital was not necessarily the channel's best friend, and because they move so much business through the channel they don't want to jeopardize that," said a source close to Compaq."Compaq will try to move most of [Digital's] services staff to the enterprise and to the low-end to the SOHO [small-office/home-office] market and leave the middle ground for the channel."
Joe Ferlazzo, director of Technology Business Research Inc., Hampton, N.H., said, "Compaq will pick and choose which portions of the services business it will keep and jettison those that conflict with its channel partners."
When the ax does fall it will hit more than Digital, sources close to both Digital and Compaq said. Layoffs will come immediately after the acquisition is finalized and will include Compaq, Digital and Tandem employees. "There are sales through the channel, but so much of it is a proprietary backbone. I wouldn't be surprised if people of that era were asked to go," said a Compaq source. Insiders said much of Digital's middle management would get pink slips, too. Bruce Claflin, senior vice president at Digital, decided not to join the merged company (see CRN Online, April 16).
A large portion of Digital's Maynard operation will remain intact. Several sources said to look for as much migration north as south. With operations continuing in Maynard, they said to expect Compaq employees to relocate north. Senior management, however, will stay in Houston.
Manufacturing, particularly for Alpha, is important to Compaq's strategy going forward. "Compaq ultimately wants the channel to sell the Alpha box, not the way it's been through just a few Digital resellers today but like an explosion," said a Compaq insider. "And that's not just sales, but bringing people up to speed servicing the product."
Compaq would like to use Alpha to take on Intel Corp.'s Merced, which could start in the $4,500 range, analysts said. An attractively priced 64-bit Alpha chip could be more attractive to VARs and customers. "[Compaq] could actually gain some market share against Intel at the high end and provide lower-cost boxes," Ferlazzo said.
The principal architects of the integration from Compaq are Chief Executive Eckhard Pfeiffer, Chief Financial Officer Earl Mason, Pearse Flynn, vice president of services and support, and John Rose, senior vice president of the enterprise computing group, said a source close to the effort.
William Strecker, Digital's vice president of research and development, and Rose are working with three subteams to further the integration, according to an internal Digital document. Norm Goldberg from Tandem is in charge of expertise-led industry solutions, Digital's Janet Wallace is leading the service-led infrastructure solutions team, and Ronnie Ward from Compaq is responsible for the partner-led volume solutions team. Each subteam has representation from all three companies. The memo also described a three-pronged services strategy for industry, infrastructure and volume solutions.
Still, the integration and transition will be a tricky one. Market shifts at the low end are forcing Compaq to move ahead with its enterprise play. "IBM [Corp.] is willing to take a bath in its PC business to get the services business they see coming," Ferlazzo said. "The scenario of sub-$500 PCs by the end of the year is not really that far off. Where IBM and [Hewlett-Packard Co.] can really push the services side to compensate, that's a very dangerous position for Compaq to be in-and they know it."
Compaq also faces trouble on Wall Street. Because of the inventory problems and disappointing first-quarter results, Compaq senior management has lost credibility with Wall Street, said industry and financial analysts. "Some people on the street are in shock that Earl Mason is still there," one analyst said.
Financial analysts are pinning their hopes on Compaq's ability to cut bloated inventory in conjunction with a move to channel assembly and a quick conclusion to the Digital acquisition. Last Thursday, the FTC removed a potential hurdle by clearing the Intel-Digital patent-lawsuit settlement.
"As long as they carry the ball and get this deal done, that's what we need," said one financial analyst who asked not to be identified. "Do I have an ax to grind with them right now? No. But I sure will if this deal doesn't go through."
KIMBERLY CAISSE contributed to this story.
Copyright r 1998 CMP Media Inc.
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