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September 25, 1995

HEWLETT-PACKARD’S BID IS BELOW CONVEX MARKET PRICE

By CBR Staff Writer

Hewlett-Packard Co clearly sees hidden value in its ailing Precision Architecture RISC partner Convex Computer Corp, because it has agreed to pay $150m in shares for the 95% of the Richardson, Texas minisupercomputer and massively parallel systems builder. The offer works out at $4.83 for each Convex share, a discount to the $5.625 at which Convex’s shares closed on Thursday: Hewlett says heartlessly that it doesn’t feel the need to pay more because market gossip about a bid had pushed the price up. The move is in contrast to the last time one of its partners ran into difficulties: when its fault-tolerant Unix systems supplier Sequoia Systems Inc hit the buffers three or four years ago, Hewlett sat on its hands and left Sequoia to find its own salvation – which it has now triumphantly done. The belief is that while Hewlett marketed the Convex machines as adjuncts to its own workstations, customers want a single source of supply and also needed reassurance that Convex would survive. Hewlett hopes that Convex will start growing again once those two criteria are met. The Exemplar massively parallel global shared memory systems based on Precision Architecture RISC were introduced after the bottom dropped out of the market for the Convex C series of GaAs-based vector supercomputers. Exemplar uses compiler technology enabling HP-UX applications and C series source to run on a Mach microkernel. It’s thought the technique is playing some role in development of the Very Long Instruction Word-style compiler work Hewlett-Packard will support the merged Precision-iAPX-86 CPU with. Convex lost $61m after charges on sales down 25% at $144m last year. It has 850 employees and lay-offs are expected to be light. It will be run as the Convex Technology Center of Hewlett-Packard. Fewer than 10% of its of its installed base of 1,450 systems are Exemplars. The agreement leaves Convex free to solicit and consider alternative third-party offers and to accept a superior proposal and to change its recommendation to shareholders, subject to payment to Hewlett of a termination fee.

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