COMPAQ GROWS UP Compaq eyes corporate market
By Stephen Shankland
Staff Writer, CNET News.com
October 12, 1998, 4:20 p.m. PT
Compaq's acquisition of Digital Equipment
Corporation and Tandem is giving the company a
serious and growing presence in the world of
high-performance corporate enterprise computing,
industry observers say.
The incorporation of
Digital and Tandem into
Compaq's ranks has gone
relatively smoothly, say
sources, and will begin to
result in an increasing
array of Compaq-branded
hardware, software, and
corporate service offerings
at the extreme high-end
of computing. Further,
Compaq's management
team appears to fully
understand the benefits of
its new high-powered
technology products.
"With Digital, they bought
up a bunch of great
technology," said Gillian
Munson, an analyst with Morgan Stanley Dean
Witter.
Compaq's growth outside of its traditional base is
reflected in a breakdown of recent sales figures.
Enterprise computing at Compaq accounts for more
than half of the company's revenue, Munson said.
Compaq's non-PC products, including services and
Windows NT servers, account for 57 percent of
revenue at Compaq, she said.
Compaq still has a heavy presence in its traditional
business, selling PCs, which accounts for about 43
percent of its revenue. In comparison, PC sales are
about 15 percent of IBM's revenue and 16 percent of
Hewlett-Packard's revenue.
Roger Kay of International Data Corporation agrees.
With the Digital acquisition, "Compaq has taken a
quantum leap into being better positioned for
addressing the enterprise market," Kay said. Part of
Compaq's strength comes from new hardware
projects now under way, said Jerry Sheridan, a
Dataquest analyst. As a result of the mergers, the
company roughly now has three lines of servers:
Windows NT servers mostly based around the
ProLiant line; Alpha-based servers running Digital
Unix or Windows NT; and Tandem's Himalaya
servers, which will use the Alpha processor.
Although Alpha does not have a huge market share
now, the chip platform will give Compaq distinct
advantages. With Intel's delay of its 64-bit Merced
chip, it's likely that the 64-bit version of Windows NT
5.0 will run first on Alpha, Munson said.
"There is an early adopter pocket of profitability for
Compaq" because of its Alpha chip, Munson said.
Compaq also has new muscle in its own operating
system. An increasing number of Fortune 500
customers are considering Digital Unix as an
alternative, said Craig Froelich, products marketing
manager at Novaquest, a Los Angeles-based
integrator. Microsoft's Windows NT is making inroads
into server markets formerly dominated by Unix, but
Froelich said it'll be five to 10 years before NT is
robust enough to tackle the high-end, mission-critical
servers.
In addition, Compaq is making use of the Digital
sales force, he added. IBM and Hewlett-Packard have
had their own direct sales forces for years, unlike
Compaq. These units have largely been responsible
for landing large, multi-year contracts. Selling
services such as installing, testing, and maintaining
equipment is a growing piece of the IBM revenue pie,
and Kay believes Compaq must follow suit if it's to
become a household name in enterprise computing.
"Services are something that you have to have if
you're working with large enterprises," Kay said.
Munson said she believes that Compaq's push into
the enterprise hinges on its ability to convince big
software developers that the Compaq operating
systems are important enough to write software.
"We firmly believe that software drives hardware
sales," Munson said. So Compaq needs to convince
companies like Oracle and SAP to port its products
quickly to Compaq operating systems like Digital
Unix and OpenVMS. "The critical thing here is to
shorten that lead time" so those programs don't show
up six or nine months earlier on Sun or HP platforms,
she said.
Although layoffs of Digital staff probably won't wind
down until the end of 1998, the merging of Compaq
and Digital personnel seems to be going smoothly.
"People seemed happy," Munson said, based on
conversations with both executives and workers in the
trenches. Several Digital personnel are now in
Compaq's upper ranks. "It's pretty clear that the
Compaq executives understand where the important
assets are at Digital," Munson said.
Kanan Hamzeh, general manager of reseller Tri-Pole
Corporation/Microage, said he saw a "good fit"
between Compaq and Digital.
However, Hamzeh said he did have difficulties with
Digital personnel trying to bypass his company and
deal straight with the customer. |
