Compaq Computer Corp.'s planned acquisition of Digital Equipment Corp. would expand the world's largest personal computer manufacturer's reach in the financial services industry.
The two companies declined to discuss specific banking implications of their $9.6 billion deal, pending its expected completion in three months.
However, when announcing the merger agreement, Compaq chief executive officer Eckhard Pfeiffer cited the financial services industry as an important focus for the combined enterprise.
Even before the announcement of the Digital deal, Compaq had committed to increasing its presence in financial services.
According to data from Mentis Corp., a Durham, N.C.-based research company, Compaq provides servers to about one in four U.S. banks. Five years ago the company had virtually no presence in banking, said James Moore, president of Mentis.
The Digital acquisition would help Compaq continue to raise its banking profile, analysts said. Though Digital's fortunes in banking have flagged in recent years, the company historically has been a leading provider of hardware to banks.
Also helping Compaq become a force in financial services is the company's September acquisition of Tandem Computers Inc., which makes fault-tolerant computer systems favored by automated teller machine networks and credit card processing companies.
Analysts said a Compaq/Digital merger would be beneficial to both companies. It would revive Digital, while extending Compaq's line of high- end hardware. Additionally, Compaq could benefit from Digital's computer services business.
"Compaq will go with much stronger technology and services with a brand name that doesn't suffer from a faltering image," said Lou Mazzucchelli, analyst with Gerard Klauer Mattison in New York.
The deal also could strengthen Compaq's ties with Microsoft. Two days after the merger was announced, Digital and Microsoft announced they would continue to work together to promote Microsoft's Windows NT computing platform. They made the announcement with Compaq's blessing.
One daunting part of the merger is that Compaq may have to spend up to two years integrating Digital's operations with its own. "They have to mold those assets into competitive solutions that target areas that banks are investing in," Mr. Moore of Mentis said.
But once Compaq absorbs Digital, it should be a huge force in the NT business, said Lucinda Frink, research analyst with Gartner Group of Stamford, Conn. "The combination will be deadly," she said.
