Issue #192, April 28, 1999  

Compaq and Digital:  Almost a Year Later It Still Makes Sense 

By Stephen Lawton

     When Compaq Computer Corp. of Houston, TX, acquired Digital Equipment Corp. (DEC) in June 1997 for $9.6 billion, many questioned Compaq’s motives. Compaq, after all, was a devoted Wintel company and had little apparent need for Digital’s billion-dollar Alpha chip or its sophisticated Digital UNIX. The crown jewel of the Digital acquisition was Digital Service, the worldwide service and support organization that regularly contributed roughly 40 percent to Digital’s bottom line. 
     But Compaq has surprised many DEC-watchers, including me. I’ve covered DEC since 1984 when I joined Hardcopy, one of the original computer technology trade publications following the midrange market. (We called them minicomputers back then.) Not only has Compaq continued to develop Alpha-based systems, it also has expanded and enhanced the technology — and that comes as a bit of a surprise. 
     In a recent issue of the newsletter Shannon Knows Compaq, analyst and DEC-watcher extraordinaire Terry Shannon ( points out that the Compaq AlphaServer DS20 uniprocessor “trounces the best single-CPU performance of all rival vendors, and outperformsthe Compaq AlphaServer GS140 enterprise server by 55 percent to 90 percent depending on the benchmark.” 
     This report is good news on a couple of fronts. First, it’s great that these single-CPU-based systems are showing dramatic increases in performance, especially for applications that needthe highest performance possible. Of course, we’ve come to expect speed boosts, but this is Alpha we’re talking about here, the world-record-holder in performance — and an almost unknown player in the NT server market for small to midsized businesses. 
     It’s also great that Alpha is around at all. Many analysts had speculated that Compaq would shutter Alpha’s development and product lines because it competed directly with the high-end Intel processors. 
     Alpha is more than just alive — it’s thriving. Even Compaq’s home-state archrival, Dell Computers of Round Rock, TX, is now reselling Alphas though a deal with Alpha OEM Network Appliance. With Compaq and Dell moving Alpha boxes, can it be that Alpha finally found the champions it needed to gain respectability — and market share? 
     Compaq has proven in real terms that acquiring Digital was more than just a ploy to take over Digital’s stellar service and support operation. In addition to Digital’s billion-dollar Alpha development efforts and product line, Compaq also acquired the profitable StorageWorks operation, as well as one of the fastest, if not one of the largest, Web search engines in AltaVista. 
     Compaq is taking steps to enhance the service significantly, making it the cornerstone of a portal the company plans to spin off.  Unlike large companies that lost their corporate focus and began launching operations all over the computing globe, Compaq has done well to keep itself focused on its core business. 

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