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Digital investors OK merger

As expected, investors in Digital Equipment approve the acquisition of the company by Compaq at a special meeting.

As expected, shareholders of Digital Equipment approved the acquisition of the company by Compaq Computer at a special meeting this morning in Westford, Massachusetts.

The vote was the last step in an acquisition process that began in January, when Houston-based Compaq announced that it would take over the enterprise computing and services giant.

Compaq, the nation's largest PC manufacturer, said it was taking over Digital so that it could compete more effectively for large "back-end" computing deals. Although considered one of the leaders in Unix computing systems and processor technology, Digital had been in a sales and earnings slump during the past few years, especially relative to its competitors.

Compaq will pay about See special report: 
Birth of a giant $4.5 billion in cash and issue 141 million shares of stock to cover the transaction. Digital shareholders will receive $30 in cash and .945 shares of Compaq stock for each share of Digital stock. Overall, the deal will cost close to $9 billion.

"The acquisition of Digital reinforced Compaq's global leadership in enterprise computing," Compaq CEO Eckhard Pfeiffer said in a statement. "Compaq is committed to delivering high customer value through standards-based enterprise computing with world-class service and support."

Compaq and Digital will hold a joint press conference tomorrow in New York City at 6:45 a.m. PT to provide details on Compaq's strategy for integrating Digital and for pursuing the enterprise computing market. Among the big questions to be answered are what Compaq will do with Digital's PC division and what it plans to do with the company's Alpha processor division.

Several analysts have said that Compaq likely will act quickly to dismantle the PC division. However, Compaq is expected to support and extend the Alpha processor platform, especially in the short term, because the competing 64-bit Merced chip from Intel has been delayed until the middle of 2000.

Yesterday, Compaq unveiled its management team for the revamped company. Most of the key positions will be held by current Compaq executives.

John Rose, Compaq's senior vice president and group general manager of the company's enterprise computing group, appears to hold the most expanded role in the new organization. He will oversee all of Digital's workstation and server operations, which include all of Digital's Alpha and Windows NT efforts, as well as Compaq's Tandem subsidiary.

Robert Palmer, Digital's CEO, said yesterday that he would leave the company after the acquisition is completed.

One of the highest-ranking Digital alumni under the new organization will be John Rando, senior vice president of Digital's services division, who will become senior vice president and group general manager of services.

Compaq previously did not have a significant services operation--a void that was one of the primary drivers of the acquisition. Tandem's service group also will report to Rando.

Reuters contributed to this report.