Compaq, Samsung to advance Alpha chips
HOUSTON -- Compaq Computer Corp. and South Korea's Samsung Electronics Co. Ltd. are planning to announce Monday a preliminary agreement to spend $500 million to advance the manufacturing and marketing of Compaq's Alpha microprocessors and computer systems.
The preliminary agreement also would grant Alpha Processors Inc., Concord, Mass., rights to adapt the Alpha chip for emerging markets in networking, Compaq (NYSE: CPQ) executives said. Samsung, which owns 87 percent of Alpha Processors, builds the chips under a Compaq license.
Compaq, which also owns a small stake in API, won't expand its ownership, Compaq vice president Jesse Lipcon said.
New marketing effort
The deal comes as Compaq has been trying to improve its Alpha-based
minicomputer line, retargeting its marketing efforts to technical and
high-performance computing niches. It recently decided to quit selling the
systems with Microsoft Corp.'s Windows NT software, thus abandoning
the general-purpose market.
Analysts and computer executives said Compaq needs to invest to repair the tarnished image of the Alpha technology, which it acquired when it purchased Digital Equipment Corp. in June 1998. Alpha chips were once hailed as a speedier alternative to Intel Corp.'s microprocessors in general-purpose computers.
"Compaq is looking for a way into the Linux market. Partnerships with API and other companies in high-performance computing would be a way in," said Mike Jacobs, chief operating officer at Atipa Corp., a Kansas City, Mo., a supplier of Linux computers. Linux is the increasingly popular free operating-system software.
Compaq's Lipcon said the investment involves $200 million that Samsung will spend to enhance its production during the next two years.
Samsung has committed to developing technologies that will boost chip performance. Samsung is the largest supplier of 64-bit Alpha microprocessors. He said the $300 million includes Compaq's purchases of Alpha chips from Samsung during the next 12 months; an undisclosed amount that Samsung will pay for the new licensing rights; and the creation of a fund to invest in Linux software makers and promote the use of Alpha-based computers.