The computer industry is certainly no place for the faint-hearted. Compaq's record $9.6 billion takeover this week of the ageing giant, Digital - although signalled well in advance - shows it to be a company lacking neither confidence nor ambition. In the process, Compaq has leapfrogged into the big league where it can challenge the established elite of IBM and Hewlett-Packard by offering a one-stop shop of services and hardware, from small laptop computers to powerful mainframes.
Formed in 1982, the US multi-national has been top of the heap in the booming personal computer sector for some time. But with margins shrinking as prices are driven down in an ever more competitive market, Compaq chief executive, Eckhard Pfeiffer, made no secret of his desire to widen his company's services and products. Last year, he began to put this strategy into practice when Compaq paid $3 billion for a leading mainframe company, Tandem.
The decision to absorb Digital also fits neatly in to Compaq's stated wish to become a bigger and more versatile player. Although Digital returned to the black last year, making $140.9 million on revenues of $13 billion, the company is a much more modest operation compared to its heyday in the early 1980s. The downsizing has been painful, with thousands of jobs being shed, not least in this country, as portions of the huge multi-national were sold off in an attempt to return to profitability.
For its $9.6 billion, Compaq gets a company which has been stripped down to a lean profitable machine but is still heavy with great expertise and experience, particularly in a key area in which Compaq has little or none. This is the critical battlefield of `corporate enterprise' technology - consulting services which help customers install, program and operate their computers. Digital's slice of this growing business was valued at $6.5 billion so it represents a very large chunk of the overall deal. Then there is Digital's Internet interests, which include the highly successful AltaVista search engine.
Both companies now have a total revenue of $38 billion, spread over the main hardware and service sectors. It is a powerful new combination with real clout in the marketplace though it is still some way behind IBM's $79 billion annual turnover. In Ireland, however, the roles are reversed with Compaq/Digital now leading with sales in excess of £100 million compared to IBM's £66.7 million.
Worldwide, if IBM and Hewlett-Packard feel a chill wind from the deal, there are others who will have cause to smile, chiefly the so-called Wintel duo, Microsoft and Intel. The latter stands to gain because if Compaq grows, so will its need for Intel microchips, though the gain in volume could be offset by the new bigger company driving a harder bargain. For Microsoft, it's more business as usual. Compaq and Digital have been strong supporters of its Windows NT operating system, the engine which runs big business networks. For the 59,000 or so Digital workers around the world, including the 1,100 in Galway and Dublin, the future is not so assured. While it is too early to say what impact the takeover will have, Mr Pfeiffer's warning that Digital needs to be more efficient will strike an ominous chord with workers who have been through difficult times in recent years.