sgi-compaq deal

[DanKarron at UCBVAX.BERKELEY.EDU]

>From the New York Times, Page D1, col 6 (Business Day)
March 7, 1991
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New Venture for Compaq Called Near

By Lawrence M. Fisher, Special to the New York Times.

SAN FRANSISCO, March 6 - After rebuffing an acquitision proposal from the
Compaq Computer Corporation, Silicon Graphics, Inc. has agreed to sell
Compaq a significant minority stake and to collaborate on a new computer work
stations, people close to both companies said today.

The deal is expected to be completed by the end of the month, before the 
formal announcement in early April of the creation of a consortium that 
hopes to establish new hardware and software standards for desktop computing,
or a kind of second generation personal computer.

The consortium, which includes Compaq and Silicon Graphics, also includes the 
Digital Equipment corporation, the Microsoft Corporation and MIPS computer
Systems, Inc. The group is meant to try to unseat the dominance of the IBM 
Corp and that of Sun Microsystems in work stations.

New Processor

A Compaq-Silicon Graphics link would allow the companies to produce the
first machine meetings the consortiu's specifications, which include the use 
of MIPS's new R4000 microprocessor and operatins system software to be 
developed by Microsoft and the Santa Cruz Operation, A company partly owned by
Microsoft. Because the R4000 has yet to enter production, the new Compaq-Sgi
workstation would probably not reach the market for a year of more.

But even without the consortium, the combination of Compaq's manufacturing
and marketing ability and Silicon Graphics' technology would present a 
formidable challange to Sun. Compaq, based in Mountain View, Calif., is the 
leading maker of IBM pc clones. Siligon Graphics, a maker of high-performance
work stations, was one of the earliest companies to adopt RISC ... It is also 
the leader in workstations displaying images in three dimensions.

The proposed link ''is potentially good for both parties" said Richard Schaffer, editor of the Technologic Computer Letter. "It gives sgi an affiliation 
with a company that has the most successful new-product record in the 
industry", he said. "Compaq has never had a new-product failure: IBM can's
say that and neither can Sun"

...

The final terms of the link have not been completed, but people close to each
company said that Compaq would buy less than 20 percent of Silicon Graphics's
shares for a combination of cash and compaq stock. The two companies would 
then enter a joint development agreement to produce a new work stations, 
which would be sold by Compaq through its dealer channels, as well as by 
Silicon Graphics' direct sales force.

The people said Compaq initally proposed a merger with Silicon Graphics, in 
January, prompting the smaller company to adopt to adopt a so-called poison
pill anti-takeover measure in early February. While Silicon Graphics 
prefereed to remain independent, it has in the past sold small stakes to 
Control Data Corporations and to HNK, the Japanese broadcasting company.
Both companies declined to comment on any possible deal.

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