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The acquisition, which has been the subject of high-level, on-again, off-again negotiations for at least two years, essentially will provide Compaq with the high-end hardware technology and the worldwide corps of consulting engineers it has needed to act as a global technology provider. Together, we are a much stronger competitor than we were as separate companies," Digital chairman Robert Palmer said in a conference call today. The deal, which is expected to close sometime in the company's second quarter, comes at a time when Digital is moving away from its losses and into the black. Industry analysts also say the merger could affect rival 38 Dell Computer 39 (DELL), because Dell outsources much of its service work to Digital. Through Digital, Compaq gains 1,600 certified Windows NT technicians and 3,000 Unix professionals, as well as a full line of Unix-based servers and workstations. Once the merger is completed, expect Compaq to terminate Digital's PC and notebook business, though the company's workstation and midrange server lines should survive, analysts say. Among some of the initial changes Compaq likely will make after the acquisition, the computer maker Deal by the numbers likely will begin to rid itself of Digital's PC line as well as its computer-manufacturing capabilities. Many of Digital's employees may be relocated to Texas, as well. In addition, upper management from Digital likely will leave the company within a short period of time, much as upper management at 40 Tandem left the company shortly after it was acquired by Compaq. The deal is expected to close sometime in the company's second quarter. Roger Kay, an analyst at 42 International Data Corporation, said initial changes likely will begin soon after. Compaq likely will continue to sell Digital's Alpha and Intel-based workstations and only incrementally merge product lines. Moreover, much of the work performed by the unit lay in high-level consulting rather than in the more pedestrian--and less lucrative--area of maintenance. MCS's reputation ranks with those of IBM and HP, making its addition to Compaq's fold a coup for the company. But Kay said that, while the Compaq-Digital deal looks good on paper, it has the potential to founder on cultural issues, a point Pfeiffer himself brought up during today's conference call. They will build a better technology and wonder why people never came," Kay said, noting that Compaq has the opposite emphasis, focusing more on practical application. Interestingly, while cultural issues loom in the acquisition, analyst Chip Christiansen of 44 IDC Research pointed out that many Compaq executives came from Digital. Tandem president Enrico Pesatori, senior vice president John Rose, and CFO Earl Mason all came from Digital's ranks. Many pointed out also that the deal could spell the end of the Digital's Alpha technology, though not immediately. The 64-bit computing platform--which does not exist on Windows-Intel technology--accounts for a large portion of Digital's revenue. Digital earlier this year said it would support Intel's upcoming Merced chip, which rivals Alpha. He said he had no doubt that Compaq did its due diligence surrounding the issue. Compaq/Digital earnings The deal, which Christiansen said has been discussed for two years, probably became a reality because of Digital's concerted effort to shed itself of business units over the past two years. Since 1996, Digital has been able to rid itself of its disk drive operations, printer business, networking unit and, more recently, its chip fabrication plant. Get Up to Speed 48 Enterprise Security 49 Open source 50 Utility Computing 51 VoIP 52 Web services 53 Wi-fi 54 Spam: Report Card 2004 ZDNet's Dan Farber and NetsEdge Research Group's Peter Christy look at the latest weapons used to fight spam.
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