Compaq splashes out to get switched quick

Madge Networks and Digital division named as possible takeover targets to plug networking gap

Compaq is to delve into its $4.6 billion cash reserves to buy a networking firm, as it works towards becoming an end-to-end solution provider.

Industry insiders believe that Madge Networks or the networking division of Digital would be the most likely candidates for the acquisition.

?Compaq needs to get into switching quicker. Digital is not good at marketing its products whereas Compaq is,? said Alison Taylor, networking analyst at Dataquest.

She believes Compaq?s previous networking purchases lacked vision, but Digital would be a good match. ?The acquisitions of Thomas Conrad, Networth and most recently Microcom have not been very successful. Compaq still has a negligible one per cent market share in networking.?

Paul Smith, senior VP of marketing and sales at Asante, agreed. ?Digital would suit the business very well. It?s a terrific service organisation and it would be an excellent fit.?

But Madge has been named by many as a likely candidate because of its gigabit Ethernet and Token Ring technologies.

Graham Stewart, product manager at Compaq, confirmed the company believed the future for networking lay in gigabit Ethernet. But Taylor said the Madge acquisition would be a fatal error because Token Ring technology is dying out.

Ian Whiting, manager of the communications product group at Compaq, confirmed that the company was on the acquisition trail. ?There are several gaps in our portfolio. We have a strong core product line, but we are weak at the top and bottom ends,? he said.

Other possible buyout targets include Fore Systems, SMC and Shiva. Bay Networks has been pinpointed as a possibility in the past, but most now rule it out as being too pricey.