Tandem Computers Inc. will be adapting popular card-fraud detection software from Nestor Inc. for use on Tandem computers.
Nestor, based in Providence, R.I., makes fraud-detection software used by banks to process high volumes of credit card and debit card transactions.
The Nestor software, Prism, uses "neural network" technology, meant to mimic the problem-solving patterns of the human brain. Prism uses statistical models to pinpoint unusual patterns of card use and label them as potentially fraudulent.
At least two large banks already are using Nestor's Prism on Tandem servers: Banc One Corp. in Columbus, Ohio, and Mellon Bank Corp. in Pittsburgh.
"It's a new segment of business for us," said Richard Ghiossi, Tandem's manager of marketing programs. "We were lucky in that our technology was suitable for this. We were able to make transformations and compete on price."
Credit card applications such as Prism require systems to handle heavy transaction traffic with virtually no downtime. Tandem's fault-tolerant parallel systems are designed to provide such reliability.
Tandem's computers have been considered ideal for processing real-time financial transactions such as automated teller machine withdrawals. But in recent years, demand for Tandem systems from the usual customer segments has waned.
The slowdown reduced the company's revenues and has persuaded its executives to seek new applications for Tandem hardware.
"They have a plan. The big question is whether they will be able to execute it," said John B. Jones Jr., analyst at Salomon Brothers in San Francisco.
The arrangement with Nestor is one of several recent alliances with software and hardware suppliers that Tandem is hoping will help boost sagging revenues, say company executives.
In a deal with Microsoft Corp. announced in May, Tandem is to adapt its computers to use Microsoft's Windows NT, which some consultants expect to become the dominant client/server operating system in bank back offices.
Earlier in the year, Tandem agreed to let Compaq Computer Inc. install Tandem's ServerNet network software on Compaq server computers.
The Microsoft and Compaq deals are parts of Tandem's push into data warehousing, an information-organizing process popular with financial institutions.
"We see phenomenal growth in this area," Tandem's Mr. Ghiossi said.
The company has some work ahead.
Tandem had second-quarter revenues of $576 million but posted a net loss of $50 million, because of a $52 million pretax charge. It earned $22 million in the same quarter last year.
Stock analysts have lowered their predictions for the third and fourth quarters, noting sluggish demand at Tandem's overseas subsidiaries and uncertainty about the company's new strategy.
But Tandem officials still express optimism, and note that revenues from data warehousing services have increased 130% in each of the last three years.
