Unisys surfaces as DEC denies Compaq deal

Ironically, Digital's denial comes on the heels of resurfacing--and in some ways more credible--rumors that the Houston-based vendor might make a play for Unisys (UIS).

A Unisys acquisition would give Compaq an international service and support wing without the redundant or unwanted hardware capacity that would be brought on by a Digital acquisition. Both Unisys and Digital have extensive service and integration divisions with engineers placed all over the world. But, unlike Digital, Unisys has already pared back its hardware and product divisions, which presumably would be of less interest to Compaq.

Compaq, moreover, has been moving closer to Unisys in the past few months: the PC giant is currently negotiating with Unisys to expand that company's role as a global service and support partner for Compaq.

Digital, through its Multivendor Customer Service (MCS) division, is currently Compaq's leading global service and support partner. When multinational customers want Compaq to provide services as well as equipment, MCS often performs the work. MCS employees provide outsourcing, repair work, and other computer related tasks. They work under the Compaq name, not MCS, servicing a large territory consisting of North America, Europe, the Middle East, and Japan.

Leo Daiuto, group vice president at Unisys, told CNET that Compaq has recently been talking to an number of global service providers, including Unisys, about performing services that under the current structure would ordinarily go to Digital's MCS division. "It's all being discussed," he said.

Unisys has been acting as a regional service and support partner for a number of years, providing service on its own and on behalf of Compaq in a number of geographic areas, including Japan, where Unisys has always maintained a large presence. However, the relationship has been less extensive than the Compaq-Digital relationship. Unisys has the Caribbean and Latin America, and acts as a Compaq reseller under its own name in Japan. This past July, Compaq authorized Unisys to act as a service provider under the Compaq name in North America as well.

A Unisys acquisition, which has been rumored for months, has not been confirmed by any of the principal parties. Still, that has not kept speculation down.

Compaq has stated that it wants to become the No. 1 computer provider in the world. But the company does not have a substantial service and support division, unlike Hewelett-Packard and IBM. Both of these firms derive substantial profit from services and, more importantly, can leverage their service divisions to land multinational accounts.

To be on an equal footing, Compaq will likely have to build or buy such a division.

"You can get technology. What's hard to do is build a service and support infrastructure on your own," said Kurt King, computer analyst at Montgomery Securities.

Meanwhile, although its star has fallen somewhat domestically, Unisys has retained a huge presence overseas.

"They are the guys to beat internationally," said Karl Wilhelm, vice president of SRA International, a large developer/integrator based in Virginia. "If you have a contract in Johannesburg, nine out of ten times you will [use] Unisys. It's gargantuan."

Compaq declined to comment on any of these matters. A Digital spokeswoman likewise declined to comment on any negotiations. She added, however, that she was aware of no problems or changes in the Compaq-MCS relationship.

Digital's denial of a Compaq deal came out at Comdex/Miami. "The reality is that there is absolutely nothing going on," Bruce Clafin, general manager of worldwide sales and marketing, told a questioner during a speech at the computer-trade show.

"Those rumors have been on forever," Clafin said.

He said Digital planned to pursue its businesses independently.

Blessed with a leading spot in networked computers, software, and services, Digital has had little sales growth in the booming 1990s and has just agreed to sell its chip-making operations to Intel for $700 million.

Reuters contributed to this report.