Conference 7.286::digital

    There have been a number of magazines in our industry that have been
    speculating our this potential marriage.  It might have been a good
    one; Compaq's marketing and management might, Digital's top-shelf
    service and engineering groups.  I find it funny, but not unexpected,
    that one of the stumbling blocks was "management" issues.  I think we
    know what that means, since much of Digital's would have been nuked by
    such a merger.
    
    Chuck

    The entire article... I like the part about combining the two names.
    DIQ?  ;-)
    
The Wall Street Journal, Monday, May 5th, 1997

  Compaq Computer Corporation held high-level discussions with Digital
Equipment Corp. in 1995 and 1996 exploring a takeover of the firm,
but talks broke down last summer over management and structural issues,
according to people familiar with the events.
  The two companies reached general agreement on a purchase price for
Digital of between $9 billion and $10 billioin in late 1995, but Digital
backed away before a formal offer was made, say these people.  Compaq
renewed discussions in mid-1996, but by early September, both sides had
determined that an acquisition didn't make sense.
  For now, the talks are dead, according to the people close to the events,
despite a flurry of acquisition rumors over the past few months linking the
two companies.  Compaq and Digital declined to comment.
  The talks, and their ultimate collapse, highlight the challenges facing
both companies.  Digital, with sales of about $14.1 billion, is the
nation's fourth largest computer maker but has been beset by problems,
including fading demand for its flagship Alpha processor, and management
and sales turmoil.  With sales and profit slipping, Digital shares, which 
peaked at $76.50 in February 1996, closed Friday in New York Stock Exchange
trading at $30.50, up 37.5 cents, giving the company a market valuation of
about $4.7 billion.  Some analysts say Maynard, Mass.-based Digital, which
has about $2.5 billion in cash, is still a potential takeover target.
  For it part, Compaq, the world's leading personal-computer maker, lacks
a world-wide service organization abd high-end offerings that would allow
it to compete more effectively against rivals International Business
Machines Corp. and Hewlett-Packard Cp.  Houston-based Compaq saw a takeover
of Digital as a way to attain its goal of $40 billion in sales by the turn 
of the century, from about $18 billion last year.  Analysts wonder how it
will accomplish that task without big acquisitions.  Compaq shares closed
Friday ay $91.625, up $3.375, in composite trading on the Big Borad.
  One of the motivations behind Compaq's overture in 1995 was Digital's
$6 billion services organization.  The unit, which at the time employed
more than 20,000 people, installs and repairs computer systems, providing
support that is critical to big customers.  The unit's strong presence in
Europe and Asia, where Compaq is keen to expand, also was enticing, say
people familiar with the talks.
  In addition, Compaq believed Digital's high-end computer products would
boost its arsenal of computer servers that form the backbone of networks.
At the time, Digital's Alpha processor, an ultrafast chip used to power
its high-end computers, was starting to take off.
  The $9 billion to $10 billion that Compaq appeared ready to spend in
late 1995 represented a significant premium on Digital's market valuation,
then about $6.5 billion.  But Digital cut off the talks, which the Compaq
side had code-named "Excalibur", near the end of that year because top
executives and directors believed Digital should retain its independence
and New England legacy, say several people.
  Digital officials pushed to have its headquarters remain in
Massachusetts, and to choose a new name that would include the name of both
companies, say these people.  Also, Digital was unhappy about the chain of
command because, under the proposed structure, several of Digital's senior
managers would report to Compaq executives, these people say.
  Compaq contacted Digital again last summer, although the second round
of talks was less serious, says a person involved.  This person says one of
the reasons for Compaq's renewed interest was that weak performance had
driven down Digital's market value.  The company's share price, which
started 1996 at $64.125, sunk as low as $30.50 in July.  By Labor Day,
Compaq broke off the talks, and Digital also didn't think an acquisition
made sense, accroding to the people.
  -Evan Ramstad contributed to this article.

    re: -1
    
> The two companies reached general agreement on a purchase price for
> Digital of between $9 billion and $10 billioin in late 1995, but Digital
> backed away before a formal offer was made, say these people....
    
    
    If Digital is a public-stock company, how can Digital and Compaq
    "agree" on a price?   would not Compaq have to buy enough stock
    on the open market to control the board of directors, or do the board 
    of directors make a "gentelman's agreement" not to excercise any
    authority that would be against Compaq's desires, or what?
    
    
    

   > If Digital is a public-stock company, how can Digital and Compaq
   >     "agree" on a price? 
    
    My impression is they would agree upon a price and then bring the
    proposal to the shareholders, who would then vote yea or nay.  In a
    hostile takeover, they'd simply buy enough shares to get control.  I
    believe it's in that situation that the "poison pill" action would be
    taken to dilute the holdings of the aggressor.  That's how I understand
    it anyway.
    
    	Steve

re: .4.

Yes exactly. That's how the deal was Lotus Dev. Corp..

    where are the major shareholders on this?  At $9-10B, that is a per
    share price that is substantially better than the current price,
    and probably better than the expected share price over the next few
    years.  Does our management think they can raise the market valuation
    to $9-10B in a short period of time?  Where is the fiscal responsbility
    to enhance shareholder value or get the best possible deal for the
    shareholders?
    
    Mark
    

    Price does not seem to have been a real issue.  Compaq was prepared to
    pay approx. 50% premium to the share price at the time.  The deal
    faltered (according to the report) on lack of willingness to move a
    large part of the operations they were interested in out of MA.  That
    makes sense to me.  Compaq's primary interest would have beed
    DSD/MCS/NSIS/OMS and the heavy Stow concentration of these BU's (at
    least at a corporate level) would make it vital that any takeover was
    not hostile 'cos if the people leave, you have no services business.
    
    Re "agreeing on a price" - just a formality to ensure that the BOD and
    the business managers are in agreement the the offer represents good
    value for shareholders.  Obviously theshareholders and the market have
    the final decision.  
    
    The point that a second round of interest was shown by Compaq is
    obviously due to the fact that the share price has dropped a lot in the
    meantime.  That would mean that Compaq could have the same jewels for a
    lot less money if they maintained the original premium percentage. 
    Again, price does not seem to have been the issue.
    /Chris/

    >    Does our management think they can raise the market valuation
>    to $9-10B in a short period of time?  Where is the fiscal responsbility
>    to enhance shareholder value or get the best possible deal for the
>    shareholders?


    The $9-10B was a price discussed in 1995, it is not a current offer. 
    You would have to look at the market value of Digital when the
    negotiations were going on. 

>                      <<< Note 5275.8 by YIELD::HARRIS >>>
>
>    >    Does our management think they can raise the market valuation
>>    to $9-10B in a short period of time?  Where is the fiscal responsbility
>>    to enhance shareholder value or get the best possible deal for the
>>    shareholders?
>
>
>    The $9-10B was a price discussed in 1995, it is not a current offer. 
>    You would have to look at the market value of Digital when the
>    negotiations were going on. 

In the other topic string in which this matter is being discussed, 
it is pointed out that Digital's market value at the time was $6.5 billion.

- tom]

    All day long, trying to have a look at DEC's share price on
    www.secapl.com, I keep getting strange garbage.. is this symptotomatic?
    
    Right now there seems to be some kind of syntax error in HTML - I get
    some text referring to 
    
    <img src=http://www.secapl.com/qsImages/ad1.gif width=460 height=60
    border=0 alt="Discover a Tennessee-based comp
    
    Is DEC HQ moving to Tennesee maybe?

The past couple of weeks that server seems to be real
bogged down. Could be our proxy servers are saturated but
I suspect it's the SECAPL server. Response time is great
early in the morning and late evening, but that does'nt do 
you much good when you watching stocks.

Pete