Compaq buys Digital, an unthinkable event just a few years ago; the PC maker grew rapidly while big competitors shunned risks and lost: gambling on the 386 chip
Article Abstract:
Compaq has acquired struggling corporate computer manufacturer DEC for $8.55 billion in cash and stock, or $57.40 a share. The move positions Compaq, the world's largest PC vendor, to compete directly with giants IBM and HP. Compaq will gain market access to high-end computing and servicing computer operations for big companies. Digital reaps about $6 billion annually from such computer services. The transaction also illustrates profound changes in the cutthroat computer market. Digital emerged as the second-largest computer market in the world by the mid-1980s, trailing only IBM. Compaq, founded in 1982, began to weaken IBM's PC market share with cheaper prices and specialized features. Compaq then shifted the balance of power in 1986 with a PC that operated Intel's new 386 microprocessor chip. DEC founder Kenneth Olsen, who started the company in 1957, said most customers only needed terminals attached to minicomputers.
Publication Name: The Wall Street Journal Western Edition
Subject: Business, general
ISSN: 0193-2241
Year: 1998
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History holds some hard lessons for Compaq; earlier mergers show how deals sometimes go sour
Article Abstract:
Compaq, which announced a merger with DEC this week, can learn some lessons from other less successful computer hardware company deals. First, Compaq must maintain its focus on the shifting PC market while integrating DEC's varied products and demoralized work force. For example, high-end workstation maker Silicon Graphics (SGI) has struggled since acquiring supercomputer maker Cray Research in 1996 for $740 million. The integration of Cray with SGI diverted management, and some analysts say the purchase compounded SGI's financial problems. Second, merging product lines can prove more difficult than expected, as evidenced by HP's acquisition of Apollo Computer for approximately $500 million in 1989. Both companies used slightly different Unix-based OSs that shared a Motorola microprocessor. A Motorola delay of a key microprocessor caused HP to lose almost $750 million in new business. Other considerations include customer communications and how to handle disparate product lines.
Publication Name: The Wall Street Journal Western Edition
Subject: Business, general
ISSN: 0193-2241
Year: 1998
User Contributions:
Comment about this article or add new information about this topic: