A Year Ago: Compaq's Digital buyout is IT's biggest yet

First published: Mon, 26 Jan 1998 13:08:31 GMT

Compaq and Digital today shocked the IT world by saying they had entered into a $9.6 billion definitive merger agreement, the largest acquisition ever in the computing sector. The deal will be accounted for in cash and stock.

The pair have for years been linked with such a relationship as Compaq sought IT enterprise acquisition targets to complement its increasingly secure position as the number one PC vendor in the world. Also helping analysts make matches was Digital's spotty financial record of recent years.

However, the merger will be scrutinised long and hard by regulatory bodies, especially in the light of Compaq's $3 billion purchase of superserver maker Tandem last year. That said, any research will show that even with Compaq buying Digital, IBM remains the biggest computer maker in the world and companies like Hewlett-Packard and Fujitsu provide plentiful strong opposition.

Late last year, Intel acquired the rights to license several key technologies in Digital's Alpha microprocessor group. Compaq, meanwhile, has moved strongly into networking hardware.

"We put tremendous value on the customer relationships Digital has cultivated over the past 40 years," said Eckhard Pfeiffer, Compaq president and CEO.

"We are committed to supporting these key customer relationships by investing in Digital's strategic assets, particularly its worldwide service organisation, as well as its 64-bit leadership with Alpha microprocessors, OpenVMS, Digital Unix, and Windows NT enterprise systems, open storage and software products. Digital's focused enterprise strategy coupled with demonstrable improvements in operational performance make this a timely choice for us. In Digital's recently reported second quarter, profits doubled and the company experienced tremendous growth in its target markets."

"This merger gives Digital tremendous reach and credibility in the marketplace," said Robert Palmer, Digital chairman. "It gives us the scale and resources to make continued investments in our key technologies and services. Customers will benefit from the very complementary strengths of both companies. For example, together we will offer customers the greatest concentration of enterprise Windows NT products and lifecycle services available in the market today."