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Compaq lands big-budget deals

In the two new contracts, the computing giant will supply servers to defense contractor Raytheon and manage installed hardware for cell phone maker Ericsson.

Compaq Computer has snared two three-year contracts, one with defense contractor Raytheon for $200 million to $250 million and one with Swedish cell phone maker Ericsson for $150 million.

Compaq beat out its fiercest rival, Dell Computer, as well as its would-be acquirer Hewlett-Packard to become Raytheon's primary supplier of Intel-based servers, desktop PCs, workstations and laptops, said Peter Blackmore, Compaq's executive vice president of sales and service.

The Ericsson contract, an expansion of an existing relationship, is primarily an outsourcing arrangement under which Compaq will manage the company's installed hardware, Blackmore added.

The deals are good news for Compaq, which has struggled with the economic downturn and a brutally competitive PC market. The company has been on a roll, though, with recent deals at American Express and the U.S. Post Office.

Compaq also recently announced a multiyear deal to supply General Motors with PCs, a $495 million deal to supply computing services for General Electric Aircraft Engines and a $20 million-per-year deal with drug wholesaler Cardinal Health. Blackmore hopes two more major contracts will be announced by the end of the year.

Blackmore believes the deals not only provide revenue, but also show faith that Compaq's merger with HP makes sense.

"The customers get the logic of the merger," Blackmore said. "We will have a transition for them. They trust us."

But product lines are in limbo, particularly with the vocal opposition to the merger that some fear could leave Compaq and HP separate after all. Competitors are crowing about the uncertainty.

Dell said that a major bank's chief information officer approached Dell, panicking about the prospects of the merger. And Sun Chief Executive Scott McNealy quips that part of plan to cope with the recession is "just answer the phone calls from HP and Compaq customers."