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November 9, 1995

COMPAQ’s ACQUISITION OF THOMSON-CONRAD SEEN AS EASY MOVE TO PROMOTE ITS OWN PRODUCTS FOR END-TO-END NETWORKING

By CBR Staff Writer

Compaq Computer Corp’s purchase of network interface board and hub maker, Thomas-Conrad Corp, Austin, Texas (CI No 2,774), appears to fly in the face of the company’s recently espoused aim to offer end-to-end enterprise computing via partnerships with market leaders. At its Innovate Forum ’95 in Houston, Texas last month, where the deal was announced, the news was greeted with dismay by network integrators who said the purchase of Thomas-Conrad, hardly a heavyweight in its field, appeared to be simply a way for Compaq to push its own networking products into the market and ensure that customers went for Compaq kit, end to end. Those integrators that Computergram spoke to felt the company had not explained how they would fit into Compaq’s global domination plans and said that despite the platitudes about the company’s plans offering them a win-win situation, they were not reassured by any such claims. Indeed, throughout Innovate, while Compaq talked a good partnership story, there were moments when it looked as if the juggernaut that is this flourishing personal computer maker, was picking up partners and dropping them to suit the angle it was promoting. For example, Oracle Corp, with which Compaq has done a lot of the failover work on its server line, was forgotten in all the excitement of the Microsoft Corp-Tandem Computers Inc clustering technology announcement. This, the company assured the press, was merely a misunderstanding on our part. In response to the criticisms that the talk of partnerships was glib, Compaq said it was genuine about in its desire to work with partners but confessed itself frustrated at the lack of standards, in the networking field at least. Gary Stimac, senior vice-president of the systems division, said the acquisition of Thomas-Conrad, and the opportunity to sell products, would mean that the company could use weight of sales to push for standardisation and it makes sense to have end to end connections in the wide-to-local area network technology market. Doug Pushard, formerly director of product planning in the systems division, who will head the new Internetworking Products Group spearheading this vision, said the adoption of standards was very difficult to do through partnerships. Not quite the story Eckhard Pfeiffer, president and chief executive, was telling the day before when he described Compaq as being at the forefront of a paradigm-shift from expensive, proprietary computers to servers based on personal computer commodity parts, which would be achieved through partnerships.

Laid off 25 staff

And if networking standards were so difficult, why then hadn’t it bought Cisco Systems Inc, to which it has gone for the company’s Internetworking Operating System? Compaq said Cisco led the field and partnering with a market leader was straightforward: no such front runner existed in the network interface board market; it knew, it had looked. At first glance, Thomas-Conrad, which will form the backbone of the Internetworking Products Group, may not seem the most obvious company to buy. In September it laid off 25 staff, claiming that its aggressive plans of earlier in the year had left it strapped for cash, although in light of the company’s sale, it looks more like streamlining itself to make itself attractive to potential purchasers. That aside, it can’t have hurt that three of Thomas-Conrad’s board members, including president and chief executive Bob Vieau, are all ex-Compaq, although both companies said this was coincidental. When the deal, for an unknown sum but a mixture of cash and stock, formally goes through, the board will resign. A more cynical view of the purchase, and one concurred with by Compaq insiders, is that while Thomas-Conrad is not the best known manufacturer in its field, it’s close to home, has manufacturing capabilities, and is small enough – turnover of $55m last year – to absorb without causing the culture shock to Compaq at least, that a larger company might have caused. The company will be left in Austin and there is likely to be staff and manufacturing capacity increases. Thomas-Conrad’s products will continue to be developed and sold by the Internetworking Products Group, although Compaq seems quite interested in selling its existing NetFlex family of iAPX-86-compatible network interface boards through Thomas-Conrad’s sales and distribution network, for use in third-party hardware. This calls for a rationalisation of these two lines and a move into Asynchronous Transfer Mode. First products from the purchase, and the work Compaq is doing with Cisco, are due in early to mid-1996.

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