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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Night Writer who wrote (33286)	9/23/1998 6:46:00 AM
From: Elwood P. Dowd	Read Replies (2) \| Respond to of 97611

NW..... Sorry if this article has already been posted here. El 09/21/98- Updated 10:01 AM ET The Nation's Homepage Compaq finds bonus in Digital HOUSTON - Compaq, the world's biggest producer of personal computers, is using its purchase of Digital Equipment to reinvent itself as a major player in the lucrative market for huge corporate computers. But an unexpected bonus in that $9.6 billion deal could make Compaq a solid contender on the Internet as well: Digital's Alta Vista Internet search engine. The potential of Alta Vista wasn't factored into the Compaq-Digital deal. Yet now CEO Eckhard Pfeiffer sees Alta Vista as a crucial part of Compaq's strategy to woo more consumers to its products. ''We didn't think there was much value in Alta Vista,'' says Earl Mason, Compaq's chief financial officer. ''But that's a very valuable asset. We're in negotiation with a lot of people to position that as a key Compaq offering.'' That's one reason Compaq paid a California businessman who ran an unrelated business with the Alta Vista name $3.35 million to acquire the Internet address www.altavista.com. Digital used the harder-to-find www.altavista.digital.com. The Internet was just another of the technology shifts that Digital missed during its sad, decade-long decline from the third-biggest computer company to a has-been that had lost billions of dollars and shed half its workforce before it was bought. Digital software engineers developed Alta Vista and it quickly became a favorite search engine on the Internet. But other search engines such as Excite and Yahoo! expanded into comprehensive Internet directory sites and content providers while Alta Vista did little to create a site that advertisers would value. Gateway to consumers Compaq isn't going to make the same mistake. Indeed, the Internet is a central part of Compaq's consumer strategy, and Alta Vista opens doors. Even without aggressive marketing and partnerships, Alta Vista is still a well-liked search engine, ranking 10th among search sites in recent months according to Relevant Knowledge, a company that tracks Internet usage. Its 9.2 million unique visitors a month is dwarfed by Yahoo!'s 25 million or America Online's 21 million, but Compaq says the growth potential is enormous as low-cost PCs enable people with lower incomes to get online. With Microsoft, Disney, NBC and others joining AOL, Yahoo! and Excite in the portal business, one might wonder why Compaq thinks it can profit from creating yet another place from which consumers can launch their Web browsing. ''We're shipping millions of PCs with our Internet buttons,'' Pfeiffer says. The ''Internet buttons'' are part of Compaq's proprietary keyboard on new models, giving consumers the ability to log on to the Internet by pushing a single button on their keyboard. The buttons currently are pre-set to Alta Vista, a customized Compaq-Yahoo gateway, a Compaq shopping page and electronic mail. Because most consumers use whatever portal is set as the default when the PC is purchased, every Compaq customer potentially is an Alta Vista user, Pfeiffer says. ''It's a tremendous opportunity.'' Mason says he's being barraged by phone calls from companies that want to link with Alta Vista. Top priority is choosing the right kinds of companies with which to link Alta Vista so that its content goes far beyond Internet searches. If plans proceed as expected, the development of Alta Vista will let Compaq push PC prices down below their current floor of $799. Rather than profiting solely on the hardware, Compaq expects to profit from Internet advertising and from recurring fees paid by Internet service providers in exchange for getting Compaq's customers. Those fees would subsidize the price of the PC. Getting a PC into the home opens up that revenue stream, which is why they have to be simple, reliable and low-cost, Mason says. Jack Staff, chief economist at Zona Research, says Compaq might be on solid ground. ''The only way (the Net) is going to get super-widespread is if it's totally idiot-proof,'' he says. If customers open up a Compaq PC box, plug it in, push a button and land on Alta Vista, ''they may have an edge.'' By Doug Levy, USA TODAY