List: axp-redhat Subject: Compaq's Purchase of Digital: Let the dust settle From: "Jon 'maddog' Hall, USG Senior Leader" <hall () zk3 ! dec ! com> Date: 1998-01-26 12:38:26 Remember all the mail messages on this list when the rumors of Intel's "purchase of the Alpha" came out? Before we spend hours and days debating this on this list, let's take a breather to see what rolls out. In the meantime, since I just came back from a meeting on this, let me give some insight: First of all, in a merger like this, nothing happens real suddenly. People at the top make the decision to have the merger, then the reality of things trickle down. Even if this meger goes through smoothly (i.e. FTC does not make any waves), it will take a quarter or two for PLANS to be created, much less action to be taken. Secondly, Digital has agreements with Intel, Samsung and Mitsubishi regarding the Alpha which we (and Compaq) have to honor. Third, one of the "selling points" of Digital is the Alpha, and our ability to make world-class servers out of it. What I see in this deal (and this is definitely "maddog" speaking, not Bob Palmer) is: o Digital gets both more and better channel support than before o Compaq gets a world-wide support group and larger direct sales force o The merged companies become #2 in the industry, with $37.9 Billion in revenue last year o Compaq gets access to several world-class operating systems o Digital products get name recognition through Compaq (yes, I dare say that to the general public, Compaq has better name recognition than Digital) o I would dare say that Compaq advertises far more than Digital o Digital's PC technologies will blend with Compaq's, and Compaq will then market them o As before, when we sold the FAB plant to Intel, we predicted lower prices of Alphas due to increased utilization of the plant. Compaq's quantity purchasing power of components and volume line-production should help our production of boards and systems drop. As to the specific questions about the Alpha boards, Alpha Linux and Digital's support of Linux, I see no reason for that changing. The investment we make is a good business proposition. There is no reason for Compaq to change that. On the other hand, it now gives Linux a chance to approach Compaq "from inside" to convince them to give better support of Linux on Compaq Intel systems, as well as Alpha. md -- ============================================================================= Jon "maddog" Hall Internet: maddog@zk3.dec.com Senior Leader, UNIX Software Group Executive Director, Linux International Digital Equipment Corporation Linux International Mailstop ZK03-2/U15 80 Amherst St. 110 Spit Brook Rd. Amherst, N.H. 03031-3032 U.S.A. Nashua, N.H. 03062-2698 U.S.A. WWW: http://www.unix.digital.com WWW: http://www.li.org Voice: +1.603.884.1341 Voice: +1.603.672.4557 FAX: +1.603.884.6424 Office: ZK03-2/V15 Board Member: Uniforum Association
List: axp-redhat Subject: Re: Compaq's Purchase of Digital: Let the dust settle From: Eric Hilton Jones <ehjones () whale ! st ! usm ! edu> Date: 1998-01-26 12:51:10 Just out of curiousity, what is the probability that Compaq will market alphas as nothing but high-end servers and scientific machines, and will cut the desktop machines completely? After all, their desktop PC market is larger for the intel chip than for the alpha one. My fear is that the alpha, being a "specialty" machine, will be jacked up to Compaq-style prices. Eric
List: axp-redhat Subject: Re: Compaq's Purchase of Digital: Let the dust settle From: "Jon 'maddog' Hall, USG Senior Leader" <hall () zk3 ! dec ! com> Date: 1998-01-26 14:18:27 ehjones@whale.st.usm.edu said: > Just out of curiousity, what is the probability that Compaq will > market alphas as nothing but high-end servers and scientific > machines, and will cut the desktop machines completely? After all, > their desktop PC market is larger for the intel chip than for the > alpha one. My fear is that the alpha, being a "specialty" machine, > will be jacked up to Compaq-style prices. Eric (et. al.), Again, this is "maddog" speaking, and not upper-level Compaq and Digital management, but: Compaq might decide to market Alphas as high-end servers and "scientific machines", but Samsung and Mitsubishi are both dedicated to seeing volumes of Alpha chips roll out, and they have been fairly aggressive in going after OEMs with board sales. And let's face it, most Linux people buy from our OEMs, not directly from Digital, for their Alpha Linux hardware. Likewise many Alphas are sold through our embedded system sales, utilizing Alphas in high-end printers, scanners, real-time applications, etc. These require board-level Alpha systems, and these board groups that also supply "low-cost" solutions through OEMs. I do not see them going away. Next, most software developers do not buy "high-end servers" for developing programs. They require low-cost workstations in order to do this. Not to have a presence in the low-cost workstation space with Alpha would be a poor business decision, affecting the number of applications that could be found on your server. Finally, we recently sold $100 Million of Digital Unix workstations to a large government (not ours) as just ONE of our workstation sales. Sales of that magnitude keep engineering investment going, even in as large a combined company as Compaq/Digital. md -- ============================================================================= Jon "maddog" Hall Internet: maddog@zk3.dec.com Senior Leader, UNIX Software Group Executive Director, Linux International Digital Equipment Corporation Linux International Mailstop ZK03-2/U15 80 Amherst St. 110 Spit Brook Rd. Amherst, N.H. 03031-3032 U.S.A. Nashua, N.H. 03062-2698 U.S.A. WWW: http://www.unix.digital.com WWW: http://www.li.org Voice: +1.603.884.1341 Voice: +1.603.672.4557 FAX: +1.603.884.6424 Office: ZK03-2/V15 Board Member: Uniforum Association
List: axp-redhat Subject: Re: Compaq's Purchase of Digital: Let the dust settle From: Keith Baker <toaster () cybercom ! net> Date: 1998-01-26 19:03:15 > o Digital's PC technologies will blend with Compaq's, and Compaq > will then market them Did someone say technologies? Compaq's only managed to give us proprietary crap. > o As before, when we sold the FAB plant to Intel, we predicted lower > prices of Alphas due to increased utilization of the plant. Compaq's > quantity purchasing power of components and volume line-production > should help our production of boards and systems drop. Hummm... How does Compaq lower prices... They make computers that suck. I love digitals for there durability and usability. And I don't want compaq to screw it up. Anyone ever try to run a 5 year old compaq? Did you want win95 support for that on board ethernet and scsi? Oh I'm sorry, they didn't use that in anything but compaq's... My UDB has standard hardware that I expect supported for a long time. NCR scsi controlers aren't going away and the dec chip ethernet controlers are used all over the place. Ok... The TGA adapter is one exception. The thing is a tank! /--------------------------------------------------------------------\ |Keith Baker 74 Peter Hans rd | |Toaster@cybercom.net Carlisle, Ma 01741 | |Fathers (508) 371-2887 Mothers (508) 371-0862 | | Http://duct.cybercom.net/keith | \--------------------------------------------------------------------/
List: axp-redhat Subject: More Dust Settling From: "Jon 'maddog' Hall, USG Senior Leader" <hall () zk3 ! dec ! com> Date: 1998-01-26 23:10:29 O.K. Partially to answer Keith Baker's rant against Compaq, and partially to keep you up-to-date with what is going on..... Digital is to be a wholly owned subsidiary of Compaq. We will continue to make Alpha chips, boards and systems. What will happen in the Intel PC space is unknown.....but you would not be on this list if you were too concerned about the Intel PC space.... One of the benefits to Compaq (according to this VP) is that they get good engineers in a campus fairly close to Boston. According to this VP, Compaq has a difficult time attracting the number of engineers they need to Houston, Texas, and they had been considering opening up an east-coast engineering group. This is not surprising. Sun and (until recently) HP also have campuses here. Between all of this (and the fact that both Digital and Compaq are actively hiring engineers) we do not expect any lay-offs of Alpha engineering personel. Nor do we anticipate any layoffs of support people. In fact, we have a long standing arrangement with Compaq previous to this to supply support to Compaq's customers. This just became easier, and I anticipate that we will be hiring even more support people, both Intel and Alpha. Finally, to answer Keith's question about how Compaq lowers prices, I will clarify that prices of computers drop dramatically when they get to high volume of manufacture for several reasons: o you can set up high volume lines to produce components and systems o you can order parts in much larger quantities Manufacturing lines are set up to produce certain things. Ideally what you want to do is to set up a line to produce *exactly* the right amount of widgets for *exactly* the life of the product. No inventory anywhere, just-in-time delivery of everything. Now that we have all had a laugh..... ...because while it is good in theory, it hardly ever happens, and it is more difficult for smaller lines and lower volumes. The real truth is that you get as close as you can, BUT in a lot of ways the larger the line, and the more you can produce on it in its life, the more you make up for the tooling costs, and hold in-bound inventory in check. Ergo, manufacturing in larger numbers almost always helps. Now, if you can spread those widgets manufactured over two or more products, you can even out your deliveries (taking into account lulls in sales performance), and extend the life of the line. So, "ramping up" for a large run helps. Compared to what Compaq does in any part of its manufacturing, Digital has small runs. Now for the purchasing part: Memory chips (for example) are memory chips. Only certain companies make them. But when a company that sells 1000 systems a month, each with 32 Meg in them tries to compete with a company that sells 100,000 systems a month with 32 Meg in them, guess who the memory company gives the better discount to? The better delivery dates (remember the "just in time" deliveries?) Now hold that concept and apply it to disk drives, capacitors, resistors, video displays, cables (ahhh, cables...talk about expense...) and we have not even talked about the concept of design yet. And a lot of what Keith did not like was the design, not the components. This is exactly why Digital applauded when AMD said that they would make their K7 use the same motherboards as Alpha. This meant that there would not just be a market for 10,000 Alpha boards, but 10,000,000 (some with Alpha and some with K7s). And (more importantly to our OEMS and to you, our end customers) Digital could not supply all of those 10,000,000, so there would develop a competative market for different board designs that met different needs. And prices would drop, perhaps to the same price as a "PC" motherboard. Which makes our OEM systems cheaper, which means more Alphas are sold. Incideous, isn't it? Selling more Alphas by selling more K7s, and from a company that sold its FAB to Intel. And don't get me wrong.....Compaq benefits from the increased volume of Digital's market as we benfit from the increased volumes of their market. Compaq has sold to a particular market in the past. While you may not like the fact that they built in a lot of the functionality onto the motherboard so it could not be upgraded easily, this fit a certain portion of their market. I do not believe that it is the market they wish to penetrate with Digital's engineering and products, ergo you will probably see a different style of engineering from the Alpha line. As always, these are my observations (with a little input from the VP) Actual reality may vary. With this, it is late, and I hear a pizza calling me, and perhaps a beer or two. Let's let the dust settle a little more. And now, back to technical discussions. md -- ============================================================================= Jon "maddog" Hall Internet: maddog@zk3.dec.com Senior Leader, UNIX Software Group Executive Director, Linux International Digital Equipment Corporation Linux International Mailstop ZK03-2/U15 80 Amherst St. 110 Spit Brook Rd. Amherst, N.H. 03031-3032 U.S.A. Nashua, N.H. 03062-2698 U.S.A. WWW: http://www.unix.digital.com WWW: http://www.li.org Voice: +1.603.884.1341 Voice: +1.603.672.4557 FAX: +1.603.884.6424 Office: ZK03-2/V15 Board Member: Uniforum Association