Compaq to buy Tandem in latest server purchase

Compaq Computer Corp. and Tandem Computers Inc. last week inked a multibillion-dollar merger agreement the latest in a series of deals linking PC vendors to midrange and high-end server manufacturers.

Compaq the world's largest PC maker will pay $3 billion in stock to purchase Tandem a manufacturer of high-end servers designed for the on-line transaction processing market. Tandem will become a subsidiary of Compaq. The deal is scheduled to close in the third calendar quarter of this year.

In acquiring Tandem Compaq would be able to add enterprise-class servers to its handheld notebook desktop workstation and server product lines said Eckhard Pfeiffer president and chief executive officer of Compaq.

The broader product set would allow the company to rival such systems vendors as Digital Equipment Corp. Hewlett-Packard Co. IBM Corp. and Sun Microsystems Inc. industry observers said.

"Compaq is very clearly trying to push up from commodity PCs and PC servers to offer midrange and large-scale servers " said Brian Jeffery managing director of International Technology Group a Mountain View Calif. market research firm. "Give them a few years and they could be HP."

Tandem offers a range of server products. At the high end Tandem offers its Himalaya massively parallel servers which run reduced instruction-set computing processors and Tandem's NonStop operating system. FDC Technologies Inc. has been supplying Tandem's K20000 Himalaya servers on the company's Stock Point Logistics Integrated Communications Environment pact with the Navy.

Tandem however also has branched into servers employing Intel Corp.'s Pentium Pro chips and Microsoft Corp.'s Windows NT. Clusters of the company's S-series Windows NT servers have been demonstrated running up to 64 processors according to Jeffery. Tandem technology including its ServerNet clustering architecture could play a role in creating very large Windows NT server configurations Jeffery said.

In the federal market Compaq could provide Tandem with a channel for providing its server products. Compaq holds a General Services Administration schedule but also supplies a number of integrators and resellers on GSA and indefinite-delivery indefinite-quantity contracts. Compaq federal executives could not be reached for comment.

One in a Series of Deals

The pending Compaq merger follows by one week Gateway 2000 Inc.'s announcement of an agreement to acquire Advanced Logic Research Inc. Gateway 2000 the second-ranked GSA Schedule B/C player in fiscal 1996 would gain access to ALR's Intel server technology. ALR earlier this year became the first company to ship a six-way Pentium Pro server.

And in mid-June PC maker Micron Electronics Inc. agreed to acquire NetFrame Systems Inc. which manufactures high-end multiprocessor servers. Both companies market their products to federal agencies through the GSA schedule Micron products also are available on the Air Force's Desktop V contract.

"All three of these transactions are examples of successful companies trying to fill holes in their product lines " said Brian Klene executive vice president for sales and marketing at Micron. He said the buyers including Micron are responding to growth in the server end of the market.

"In the coming years the enterprise space will become attractive " Klene said. He said the acceptance of network computers Net PCs and other thin client devices will shift "capabilities and sophistication" from the client to the server.

"Getting into the server side of the market is going to be a good way to ensure that you stay in the game " said Payton Smith a research analyst with IDC Government.