Recent speculation that Compaq is poised to make an acquisition bid for Digital Equipment may have arisen from Compaq plans to adopt Digital's Alpha processor. Sources agree this is a reaction to chip wrangles between Compaq and Intel and Compaq's fear that Intel has too much influence over its products.
A source close to Digital said Compaq was considering adopting Digital's Alpha chip for some systems products after its public spats with Intel. This may well be the extent of the partnership, although rumours are doing the rounds of Wall Street that Compaq could benefit from full acquisition of Digital, which would provide the world's biggest PC company with server and workstation hardware without becoming reliant on Intel.
"A while ago Compaq went to AMD for its second source of  chips for PCs and AMD used to build processors at Digital's South Queensferry plant before that was sold to Motorola," the source said. He pointed out that Compaq chief executive Eckhardt Pfeiffer has previously made statements showing he is not happy with Intel's terms for using its chips and Compaq has suffered shortages of Intel processors.
Significantly, Compaq has moved further away from Intel this week by adopting Cyrix as the CPU supplier for a budget Presario PC, according to sources. If that is true, Compaq has spent a lot of money on redesigning its Presario simply to avoid having to use Intel chips inside the PC.
Another source at Digital UK described the acquisition speculation as unlikely. "But its possible," he admitted. "I haven't heard about anyone here quickly buying Digital stock, though."
An insider said the planned Presario PC, which is expected to sell for less than $1,000 at its launch next month, will be based on Cyrix's GX86 chip. The processor uses a PCI interface and is tweaked for multimedia uses. Digital itself this week cut the prices of its Alpha workstations in a bid to boost Alpha's share of the Windows NT market, as 70 per cent of the workstations Digital has shipped in the last 18 months were driven by Intel CPUs. The cuts make Digital's machines less than 10 per cent more expensive than slower models based on Intel chips (see separate story).
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