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Compaq's networking strategy

Continuing to build its low-end networking business, the company has partnered with potential rivals Intel and 3Com.

    What is Compaq Computer (CPQ) up to?

    The PC desktop and server giant has built a low-end networking business from nothing over the past two years, largely via acquisitions, to offer customers a "one-stop shop" approach to building a computing infrastructure for their businesses.

    Now Compaq is partnering with two companies that would seemingly qualify as rivals in the networking space: Intel and 3Com.

    As reported yesterday by CNET's NEWS.COM, Compaq and Intel will ally to mutually develop networking technology for network interface cards (NIC) and server adapters, hubs, switches, digital subscriber line (DSL) technology, and remote access servers.

    On top of that, 3Com and Compaq are expected to announce a partnership next week based on talks concerning distribution of 3Com network interface cards (NIC) via Compaq's configure-to-order program, according to a Reuters report.

    More details are coming September 23, said 3Com. Other specifics regarding the scope of the proposed agreement were not disclosed, and spokespersons for the two companies were not immediately available.

    The deals give new meaning to "coopetition," a popular term to characterize the need to partner with potential rivals in the gritty high-tech business. But officials from both companies remained optimistic about the prospects for their respective networking businesses, focusing on the need to drive standards to expand the marketplace rather than the obvious overlaps in products.

    "The benefits of being able to drive and deliver standards-based products across the board far outweighs any competitive issues," said Greg Lang, business unit manager for Intel's networking products division, on the deal with Compaq.

    Who stands to lose, as a result of the deals? Analysts say systems giant Hewlett-Packard should be worried. The network deals make Compaq a full-service systems provider and a direct challenger to HP's full-service business model.

    For users, the Compaq/Intel deal means that networking equipment from both parties will likely benefit from increased use of a common hardware platform based on standards such as PCI (peripheral component interconnect).

    "We intend to drive down complexity and move to common driver sets," said Kirk Roller, director of the NIC product business unit for Compaq. "We compete with everybody; there's plenty of room for both of us."

    The deal could bring new focus to Compaq's networking division, which certainly carries a prominent brand name but has yet to offer a serious challenge to competitors.

    The 3Com deal is certainly a boon to the networking monolith, giving it a superior sales channel to market its NIC cards. For Compaq, the agreement may signal an ever-increasing emphasis on providing everything for a customer and letting them pick and choose what they like, a function similar to an integrator.

    By working with Intel and 3Com, the Houston, Texas-based computing giant also gives its networking division a higher profile.

    Intel officials said the branding for mutually developed products, which will start to roll out in the fourth quarter, will remain distinct for the two companies.

    Reuters contributed to this report