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January 28, 1998

WILL INTEL-ALPHA DEAL BE CASUALTY OF COMPAQ-DEC MERGER?

By CBR Staff Writer

The Wall St Journal may simply be running something up its own flagpole, but a story in its Wednesday edition speculates that a side-effect of the $9bn-plus Compaq Computer Corp mega-merger with Digital Equipment Corp announced Monday could be the unraveling of the $1.5bn deal DEC cut last year to sell the Alpha chip-making and production rights to Intel Corp. The basis of the story is that lawyers close to the [Federal Trade Commission], which is still investigating the transaction, are concerned that the Compec behemoth now extends Intel’s dominance in the PC industry by handing over a potential rival microprocessor technology into its hands. Previously, Intel and DEC had been arguing to the FTC that, since the chip has not been succeeding in the marketplace, the handover was in fact necessary for the Alpha’s survival. Now sources close to the FTC are apparently wondering if that has all changed, since Compaq has the cash to sustain Alpha. The FTC seems to be getting as worried about Intel’s near-monopoly status as it is about Microsoft Corp’s, apparently. The paper also claims Compaq and DEC officials discussed the danger of the FTC canning the Intel-Alpha deal, but decided to go ahead regardless. Compaq may even have to take responsibility for the Alpha manufacturing plant if all goes awry, either selling it or shutting its doors. A further option, according to the Journal: make DEC sell the thing to a third party, not Intel; though who that would be is a good question. At a pre-scheduled press event held in San Francisco Wednesday by DEC and Microsoft, which was set up to discuss their nearly three year-old NT-based Alliance For Enterprise Computing, DEC officials merely parroted that Compaq was committed to all our technologies, including Alpha.

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