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Tandem profits grow 85 percent

The server hardware maker rides the popularity of Microsoft's Windows NT operating system to post a big third-quarter gain.

Compaq Computer (CPQ) may be buying more momentum than it thought.

Tandem Computers (TDM), the enterprise server maker that was plucked by Compaq last month for about $3 billion in stock, announced earnings that beat consensus analyst expectations by more than 10 percent.

The company posted earnings per share of 36 cents, according to Tandem, beating analyst estimates compiled by First Call by 6 cents.

Tandem posted an 8 percent gain in revenues, to $503 million for its fiscal third quarter, up from $466 million one year ago, and realized $43 million in earnings for the period, up 85 percent over last year's $23 million.

The company's deal with Compaq is not expected to become final until later this year. But that hasn't stopped Tandem from continuing to rebound from a series of tepid quarters.

Company officials attributed the growth to new releases of its Non-Stop Himilaya server systems and clustering software for Microsoft's Windows NT operating system. Revenue from shipments of the new server systems accounted for a 10 percent increase over the previous year, according to the company.

Last year, Tandem posted earnings of 20 cents per share for its third fiscal quarter. For the first nine months of this year, the company has earned $80 million, compared with a $46 million loss the previous year, partially related to a restructuring of the company.

"Tandem has made significant progress toward realizing the vision and strategy we put in place 18 months ago, and the company has clearly met its goal of delivering significant growth and strong profitability," said Tandem CEO Roel Pieper in a statement.