Compaq/Tandem Merger
News
by Randy Befumo
(TMF Templr)
(Originally appeared in the
06/23/97
Lunchtime News)
Leading personal computer manufacturers are concentrating on beefing up their
business product lines. Only days after GATEWAY 2000 <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTW)") else Response.Write("(NYSE: GTW)") end if %> decided
to get more serious about selling servers with the acquisition of ADVANCED
LOGIC RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AALR)") else Response.Write("(Nasdaq: AALR)") end if %>, COMPAQ COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> has
announced that it will get in the fault-tolerant computer business with the
purchase of a TANDEM COMPUTERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TDM)") else Response.Write("(NYSE: TDM)") end if %>. Houston-based Compaq will
purchase Tandem for approximately $2.6 billion in stock, exchanging 0.21
shares of Compaq common stock for each share of Tandem. Compaq slipped $1
3/4 to $105 this morning, while Tandem was up $6 1/4 to $21 1/4.
Compaq's ongoing transformation from a personal computer manufacturer to
a soup-to-nuts vendor for both personal and enterprise computer systems has
been occurred over a number of years. The addition of Tandem to the Compaq
fold gives Compaq a high-performance vendor of scaleable, fault-tolerant
systems that can run 24-hours a day. These systems are used for transaction
processing and other high volume, critical computer needs. Tandem's main
competitors include NCR CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NCR)") else Response.Write("(NYSE: NCR)") end if %> and STRATUS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SRA)") else Response.Write("(NYSE: SRA)") end if %>, with NCR probably the largest. Tandem seems well suited to Compaq because
the company is transitioning to an Intel/Windows NT architecture for its
computer systems, something that Compaq has a lot of experience with developing
and servicing.
Compaq's acquisition of Tandem gives it a product to sell to large companies
in search of processing intensive solutions. Compaq Chief Executive Eckhard
Pfeiffer believes that this acquisition has dramatically increased Compaq's
potential market, "Our total addressable market has been doubled to approximately
$650 billion." Compaq apparently does this at a relatively good price, as
it is buying Tandem for about 1.4 times sales. Pfeiffer stated that the merger
should be accretive to earnings immediately, meaning that Compaq will now
be able to earn more money with the addition of Tandem. Unfortunately for
Compaq shareholders, this may not change the published earnings estimates
because even as Tandem adds to earnings, the merger will be done as a
"pooling-of-interests," so Compaq will not be able to repurchase the stock
it announced it would a few weeks ago.
[RELEVANT MESSAGE BOARDS:
Advanced
Logic Research <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AALR)") else Response.Write("(Nasdaq: AALR)") end if %> *
Compaq
Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> *
Gateway
2000 <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTW)") else Response.Write("(NYSE: GTW)") end if %> *
NCR
Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NCR)") else Response.Write("(NYSE: NCR)") end if %> *
Tandem
Computers <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TDM)") else Response.Write("(NYSE: TDM)") end if %>] |