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November 16, 1995

COMPAQ EXPLAINS ITS PLANS FOR NETWORKING COMPANY NETWORTH

By CBR Staff Writer

Compaq Computer Corp’s latest takeover target, San Jose, California-based NetWorth Inc, manufacturer of Fast Ethernet hubs, switches and related products, claims to hold a 5% share of the market for stackable 10Base-T repeaters, and says that its Fast Ethernet product line is number two in overall shipments, currently holding a market share of some 20%. According to the two, the NetWorth name will remain, as will its existing brand names, although the title ‘Compaq’ may be incorporated into both company and products in an as yet undefined manner. No relocations or redundancies are on the cards, said Compaq. Compaq said that the purchase achieves its ambition of evolving from a personal computer company to a vendor of a complete line of internetworking products. The first plank of this strategy was the deal it struck with Cisco Systems Inc last July, under which Compaq is integrating Cisco’s Internetwork Operating System software into its forthcoming range of personal computer-based router offerings, expected in the first half of next year. The acquisition of Austin, Texas-based Thomas-Conrad Corp, a manufacturer of network interface boards and hubs, and Networth, now gives it all the components it needs to provide users with integrated clients, servers, network interface boards, routers, hubs, and network management, said Compaq, and enables its channels to offer integrated solutions to their customers… through a single vendor. The attraction of Compaq to NetWorth was that it offered a tremendous opportunity for NetWorth to accelerate market share gains by leveraging Compaq’s worldwide distribution partners, said John McHale, founder and chief executive of the company.

Not a cherry-picker

McHale will become a corporate vice-president of Compaq, and a senior member of the Compaq Systems Division. In addition NetWorth, which had not been for sale prior to the discussions with Compaq, said Compaq appealed because it was not a cherry-picker likely to hive off parts of its business, but wanted to assimilate the company whole. As to its future plans, Compaq said that the agreement with NetWorth, which is the culmination of several weeks of discussion, represents the last major networking acquisition it intends to make in the near to medium term, although future purchases are not ruled out. The company added that the assimilation of NetWorth so soon after Thomas-Conrad would not cause organisational problems, as virtually no business re-engineering was required in relation to the former. Networth’s directors and management have agreed to recommend shareholders accept to the offer which, Compaq reckons, is likely to be completed by the year-end.

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