What does the $3 billion Eckhard Pfeiffer, CEO of Compaq, buy his company? Generally viewed as a driven individual, five years ago he vowed to turn the company round with the emphasis on networks. And while Pfeiffer has achieved his goal to turn Compaq into the number one PC company in the world, he is aiming higher than that.
IBM and Hewlett Packard are two companies Pfeiffer desperately wants to supplant and the Tandem buy will help him in that goal, according to Hugh Jenkins, enterprise group product manager at Compaq UK.
He said : ?This is a great acquisition for where Compaq wants to take its server business. It wants Tandem for non-stop highly available systems at the high end. This isn?t about short-term issues, the real point is whether we can take engineering expertise and apply this to Compaq with its servers.
?You can get so far under your own steam but there?s a stage, a little bit like someone climbing a mountain, where you need someone at the top with a rope attached to you. These are people who have been building redundant systems into mainframes. In two year?s time from now, many of the midrange vendors will be caught in a pincer movement by Compaq.?
He confirmed that the real targets for Compaq are IBM and Hewlett Packard. ?This acquisition and this technology is not about people like Gateway, ALR and Dell. We understand how to keep ahead of them anyway. The people to beat are HP and IBM. This is part of a far-sighted business strategy.?
That is a view market research company IDC supports. Martin Hingley, a senior analyst at Dataquest UK, said today that the acquisition is ?probably the most important server related announcement of the year so far.?
Hingley said in an IDC Flash report: ?Compaq reached the point some time ago at which it needed to think about an acquisition of this type and there have been rumours of the company looking at a number of other potential purposes. It has been modifying some of its ideas in distribution channels this year, looking at multinational direct sales and AS/400 style agent business to its traditional two-tier strategy for the first time.?
That will mean a wider range of solutions from Compaq, IDC thinks. It will give it access to profitable, mission critical application business within large corporations, ?impossible to penetrate with PC servers alone.?
The Tandem Servernet technology, in particular, will help Compaq because it is the key component of MS Wolfpack.
Yet although IDC agrees with Jenkins assessment, and despite Compaq?s insistence it will maintain the channel model by sourcing equipment via its partners to Tandem, there are problems in the offing.
David Chalmers, head of technology at Sequent Europe, said that while he agreed that Tandem will help Compaq move into the high end, it is likely to face problems with its channel and also keeping the 4,000 direct field staff it bought.
He said: ?While it gives them a sales force which know how to deal with customers rather than the channel, it will be difficult for them to retain them.? He said that the Tandem sales force expects high rewards for the revenues they generate and also have the equivalent of a windfall because they now own large amounts of Compaq and Tandem shares.
Nor does the buy give Compaq the service and support it still needs, said Chalmers. ?They don?t have much of a services operation and Digital is the obvious target,? he said. ?Shooting Alpha and keeping the services will give them that.?
It?s been a tumultuous seven days for the PC industry after the Gateway 2000-ALR acquisition followed closely by Compaq. But worse is likely to come. Many think that Sequent itself could be the target of an acquisition and the repercussions are likely to affect other vendors like Unisys.
Unisys is a major supplier to Tandem of high end Intel boxes, and those machines are made by ALR. What happens to Unisys when Tandem pulls the plug and insists on using Compaq kit instead?
Vesey Crichton, head of the enterprise division at Compaq UK, said yesterday that Tandem will buy its machines but in a strange twist of fate will do so by sourcing them through its own channel. That, he explained, was to re-assure its normally loyal channel of its good intentions towards them.
There is more to come. When Compaq was mooting the Gateway 2000 acquisition earlier this year, one of the reasons senior executives gave, off the record, was that it would help them reach the micro businesses. That deal fell through but Michael Dell, head of the Dell Corporation, will not hesitate to get his chequebook out if he thinks that Compaq will now leap ahead in a market his own company wants. The battle of the Titans is on.
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