Compaq-Tandem deal approved

Tandem shareholders approve the company's acquisition by PC giant Compaq Computer.

3 min read
Tandem Computer (TDM) shareholders voted overwhelmingly today to approve the company's acquisition by giant PC maker Compaq Computer (CPQ).

Compaq said investors holding more than 72 percent of Tandem shares voted to approve the merger. A vote of at least 50 percent was required.

Compaq will use the acquisition to reach beyond its PC market to become a full-range computer hardware manufacturer. The deal, worth about $3 billion in stock when it was announced June 23, is now valued at about $4 billion. Compaq's stock has risen since June, pulling Tandem along with it.

Compaq's stock closed at 65-1/2, up 1-1/2 points from yesterday. Tandem's stock closed at 34, up half a point.

"This is not a merger about downsizing and economies but about growth and market share," said Enrico Pesatori, who will continue as Tandem's president and chief operating officer after the merger. He said no layoffs and no major relocations of employees are expected.

"We have a blueprint that is not final yet in terms of what we will do on the product level, the technology level, the customer level, and the sales and marketing level that will be gradually unfolding over the next few weeks or few months," Pesatori added.

Compaq, the leading PC server and desktop player in the world with more than $18 million in annual revenue, gets industrial-strength systems expertise and high-end hardware from Tandem, which has annual revenues of $1.9 billion.

Because chief executive Eckhard Pfeiffer has vowed to turn Compaq into a $40 billion company, Tandem's revenues and new markets are crucial to his vision.

Pesatori said the combined company, by year's end, will be on track to generate $24 billion in annual revenue and grow at a 25 percent yearly rate.

"Our goal is to become the No. 1 company providing products and solutions from notebooks to enterprise computing, based on open standards," he added. "We offer the broadest range of reliabile and scalable solutions across the entire spectrum of business-critical computing, from notebooks to PCs to PC servers to large, mission-critical computing."

For Compaq, Tandem's "clustering" technology to link multiple microprocessors to work on a common task is seen as critical to that goal, as it will bolster's Compaq's push into the PC server business.

"Tandem's strength in clustering is clear and that will be fully leveraged in Compaq's offering in terms of standard products, higher end products," Pesatori said. "This is a major differentiating factor in going to the market."

Compaq also more than doubles its direct-sales force, a key factor in selling big computers to major accounts. Pesatori said plans for merging the sales forces have not been finalized

The new Compaq is poised to compete with full-service computer companies like IBM (IBM), Hewlett-Packard (HPW), and to a less extent Digital Equipment (DEC).

Tandem has struggled financially in recent years, and chief executive Roel Pieper was brought in January 1996 to replace Tandem founder and longtime chief Jimmy Treybig.

Pieper is scheduled to remain CEO of the Tandem subsidiary and will add the title of Compaq senior vice president, reporting to Pfeiffer.

In the last year, Microsoft paid Tandem $35 million to adapt its clustering and fault-tolerant software to work with PC servers running Microsoft's Windows NT operating system, part of Microsoft's efforts to make NT into an enterprise operating system.