By Tony Cripps

Compaq Computer Corp may be eyeing Unisys Corp as a shortcut to achieving its long-held goal of becoming a $15bn IT services company by 2002. A senior Compaq executive said that the company is unlikely to achieve this goal by purely organic means, and admitted that several smaller acquisitions, or one major acquisition might be the only way of doing so.

Compaq services business unit is estimated to generate revenues of $7.5bn, meaning it would have to double this figure in three years if wants to meet its growth target. Andrew Binns, director Compaq Services, said that the former Digital services unit would not be able to meet the proposed target without making acquisitions.

However, most services players of sufficient size to meet Compaq’s revenue goals are mostly tightly held subsidiaries of other IT players, which could make a bid a protracted and expensive affair. Although he would not confirm that Compaq was interested in Unisys, Binns admitted that the reborn mainframe vendor was probably the most available of the upper tier IT services. Unisys had previously been suggested as a possible target for Compaq in 1997, prior to its acquisition of Digital.

Unlike most other larger services vendors, Unisys is both independent and relatively stable. It also has a similar services mix to Compaq, with network and desktop services high priorities among a broader array of consulting, systems integration and outsourcing. What is more, with $7.2bn revenues in FY1998, Unisys is not only a similar size to Compaq’s services division, it would in one move raise revenues to near the $15bn level proposed by John Rando, former head of Compaq Services.

Compaq would seem to be in a position to make such an audacious move, with $4.1bn cash at the end of 1998 and good credit. The question is whether or not it would really want to. The integration of Digital into Compaq which gave Compaq a service business in the first place has hardly been a painless process itself. And even if such a takeover was to happen it would not address one of the main criticisms of Compaq as a supplier of IT services – Compaq would still lack a consulting arm, limiting its ability to provide true end-to-end services and to challenge market leaders such as EDS, IBM Global Services and Andersen Consulting.