Mumbai, May 3: Compaq Computer Corp may manufacture its range of personal computers (PCs) at Digital Equipment India's (DEIL) Bangalore plant after completion of its proposed $9.6 billion acquisition of the US-based Digital Equipment Corporation (DEC). DEIL is a 51 per cent subsidiary of DEC.According to sources, Compaq, the world's largest manufacturer of PCs, is contemplating such a move. "It will certainly make economical sense for Compaq to have its PCs manufactured at the DEIL plant," said DEIL sources.
DEIL manufactures Digital range of PCs at its Bangalore facility, which has an installed capacity to manufacture 50,000 PCs per annum. Besides, it also manufactures electronic boards for a few domestic companies.
Compaq, on the other hand, imports its range of PCs into the country and has refrained from setting up a manufacturing facility here.
According to DEIL sources, the company is able to operate its Bangalore unit profitably despite a low installed capacity. "At just an incremental costwe will be able to increase the installed capacity," they said.
According to analysts, by manufacturing the Compaq range of PCs at its facility, DEIL will be able to achieve greater economies of scale.
"Compaq is the largest selling multinational brand of PCs in the country and its volumes are higher than that of Digital's. Having its PCs manufactured at DEIL's facility will certainly be beneficial to Compaq," they said. Compaq had in late January announced its $9.6-billion friendly acquisition of DEC for cash and stock. The acquisition, which is yet to receive clearances from the US justice department and DEC shareholders, will be the largest ever in the infotech industry.
The acquisition will make Compaq, which is presently the fifth largest computer company, the second largest in the world after IBM with global revenues of about $37 billion. After the acquisition, expected in the next few months, DEC will become a wholly-owned subsidiary of Compaq.
By acquiring DEC, Compaq will enjoy a strongpresence in the mid-range server market where DEC is a strong player with its range of UNIX-based machines. Besides, Compaq will also gain from the strong services business of DEC. Compaq had earlier acquired fault-tolerant computer-maker, Tandem Computer, which gave Compaq a presence in the high-end mission critical solutions market.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
