Compaq bid for Tandem wins broad approval

Customers and analysts appear to be giving Compaq's bid to acquire Tandem Computer an initial thumbs up as Compaq prepares to compete in the high-end server market with IBM, Hewlett-Packard, and Digital. In a stock swap valued at US$3 billion, Compaq has moved to acquire Tandem's fault-tolerant server software and hardware and its ServerNet clustering interconnect technology as part of a long-term drive to put Compaq on a par with full-service rivals.

Customers and analysts appear to be giving Compaq's bid to acquire Tandem Computer an initial thumbs up, as Compaq prepares to compete in the high-end server market with IBM, Hewlett-Packard, and Digital.

In a stock swap valued at US$3 billion, Compaq this week moved to acquire Tandem's fault-tolerant server software and hardware and its ServerNet clustering interconnect technology as part of a long-term drive to put Compaq on a par with full-service rivals.

"Our goal is to transform Compaq from a PC company to a full-range computer company," says Mary McDowell, director of marketing for server products at Compaq. "We want to use Tandem's Himalaya systems as a technology foundry and accelerate the movement of that platform's fault-tolerant software to Windows NT."

Analysts say the two companies' technologies are a good match.

"Compaq has the PC and low end of the midrange server market covered. Tandem has the supercomputer and the high end of midrange covered. One fits on top of the other," says Jerry Sheridan, an analyst at Dataquest.

Tandem has begun porting its NonStop middleware from Himalaya to Windows NT and expects by year's end to have its Non-Stop SQL database, transaction-processing software, and network services running on Windows NT.

Compaq is also preparing to push the ServerNet clustering interconnect as the de facto industry standard.

Compaq customers say they are interested in robust, scalable Intel servers but are wary of relying on existing Windows NT technology for mission-critical applications.

"From an engineering credibility standpoint, for Compaq to have its most scalable servers associated with Tandem's level of quality is nice," says John Chapman, planning and architectures group head at Amoco, in Chicago.

Chapman adds, however, that he has no interest in moving to Tandem's proprietary OS.

Despite the benefits the Tandem acquisition will bring Compaq, the company has some hurdles to face.

Providing solutions for the corporate enterprise requires building a service and support infrastructure that is more comprehensive and more international than either Compaq's reseller channel or Tandem's professional-services organization, says John Dunkle, president of Workgroup Strategic Services, in New Hampshire.

Perhaps the best part of the deal for Compaq is Tandem's direct-sales organisation, which analysts say will double Compaq's field-sales force to 4,000, giving the company the sales and support infrastructure it was after when it tried to acquire Gateway 2000 and Micron earlier this year.

However, Compaq will continue to fulfill PC orders primarily through its reseller channel, and Tandem's field team will continue to serve larger customers.

Analysts predict that Compaq's existing VARs may not be able to support larger and more complex systems, however.

"Compaq will go places they've never gone before, where they really don't have representation with the VAR community," says Cheryl Currid, an analyst at Currid & Co., in Houston.

"It's a beautiful marriage; I hope I'm not reading about the divorce in two years," Currid says.

Compaq Computer Corp., in Houston, can be reached at http://www.compaq.com.

Tandem Computer Inc., in Cupertino, California, is at http://www.tandem.com.

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