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Compaq inks deal with American Express

The computing contract will no doubt boost the PC maker's sales. But is it also a sign that corporate clients are becoming more comfortable with its proposed merger with HP?

Compaq Computer has landed a five-year, multimillion-dollar contract with American Express, the latest large deal for the company since the proposed merger with Hewlett-Packard was announced in September.

Under the deal, Compaq will install a 25,000-seat "thin client" system worldwide that will be used by American Express customer service representatives. Exact financial terms were not disclosed. Thin clients are terminals that offload most computing functions to a central server.

Besides the 25,000 desktops, Compaq will provide Amex with 400 servers under the contract while its Global Services unit will design the system. Compaq's service unit will also provide ongoing management services.

"Adopting Compaq's server-based computing and Thin Client solution supports our overall strategy of using technology that can reduce infrastructure costs, re-engineer our computing environment, and bring operational savings to the bottom line," Glen Salow, American Express' chief information officer, said in a statement.

While the contract will no doubt boost Compaq's revenue, the deal may also be seen as a signal that corporate clients are becoming more comfortable with the proposed HP-Compaq merger. When the merger was announced in September, analysts and competitors predicted that the two companies would see an erosion in business because of customer nervousness over the deal.

Instead, the two companies have apparently landed, or at least effectively publicized, a number of large corporate deals since the merger was announced. The controversial merger plan, still under review, would create the world's largest maker of PCs and server computers.

In October, Compaq won a contract with the U.S. Postal Service that calls for the company to provide over $1.5 billion worth of computing services and hardware to the agency over the next 10 years.

see special coverage: Big iron: HP to buy Compaq In November, General Motors granted Compaq a three-year deal to supply the auto giant with PCs, notebooks and services. Some PC executives have admitted that the GM contract was one of the more hotly pursued corporate computing contracts put up for bid in 2001.

HP also landed a multiyear, multimillion-dollar contract with a large public company, according to sources close to the company. To date, HP has not divulged the contract and has declined to comment on it.

Although both the Postal Service and Amex have been regular Compaq customers, the two contracts, like the GM contract, were won through a competitive bidding process, according to Compaq representatives.

"The incumbent is favored, but nonetheless, they have to win it every time," said Roger Kay, an analyst with IDC, who added, "much of the bugaboo about mergers with enterprise customers dissipates when the deal is exposed."

Competition, nonetheless, has been intense. Dell Computer executives have said that several Compaq and HP corporate customers have become Dell customers since the proposed merger or at least have started talking to the company. Dell has not named these new accounts, but the company is historically silent in this regard.

Joe Marengi, senior vice president and general manager for Dell Americas, for example, recently told CNET that the chief information officer of a major bank in North America approached the company about switching from Compaq to Dell hardware. Asked if the HP-Compaq merger scared him, the CIO replied, "That's why I'm here."