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Modem makers merging

In a move that could portend more consolidation in the modem industry, Hayes plans to buy Cardinal Technologies.

In a move that could portend more consolidation in the modem industry, Hayes Microcomputer Products plans to buy Cardinal Technologies.

Hayes has signed a letter of intent to acquire all outstanding shares of Cardinal Technologies for an undisclosed sum of cash. The companies expect to close the deal this month, pending government approval.

Microsoft cofounder Paul Allen's Vulcan Ventures owns 75 percent of privately held Cardinal. In addition, Vulcan will make a separate investment of an undisclosed amount in Hayes. (Paul Allen is an investor in CNET: The Computer Network.)

Cardinal, which had $56 million in revenue last year, will become a wholly owned subsidiary of Hayes, which had 1996 sales of $260 million. Cardinal's Lancaster, Pennsylvania, facility will be closed, and production will be moved to Norcross, Georgia, where Hayes is headquartered.

The merger is likely to affect the battle to set a market standard for 56-kbps modems.

To date, Hayes has only announced support for the Rockwell Semiconductor standard for high-speed modems, but Cardinal Technologies is currently shipping modems based on U.S. Robotics' competing x2 technology. (See related story)

Another Hayes subsidiary, Practical Peripherals, is also selling the x2 modems.

As the second-largest modem maker in the American marketplace, Hayes is in a good position to hedge its bets on who wins the 56-kbps standards battle by selling modems that support both technologies.

"What that means is that for companies or for individuals, we have products that can serve either need. In doing so, we get part of the x2 market and part of K56flex market. We think it gives us a bigger opportunity to grow our business," said Dennis Hayes, chairman and founder of Hayes. He emphasized that the company is still backing the Rockwell technology and expects 93 percent of its modems shipped in 1997 to have chips using that standard.

About 170 Cardinal employees will be affected by the merger. Some, including the Cardinal sales staff, will become Hayes employees while others will receive severance packages, according to the company.