Digital Equipment Buys 10% Stake in Struggling Olivetti : Technology: The deal gives DEC an expanded European presence and an opportunity to promote its Alpha chip.
Digital Equipment Corp., building support for a key new computer technology, has agreed to pay $322 million for a 10% stake in Olivetti, the large but struggling Italian computer maker.
The deal is the second in recent months in which a major European computer firm has turned to an American company to assure its future. International Business Machines Corp. in January agreed to invest about $100 million for a 6% stake in France’s loss-ridden Groupe Bull.
The two deals are similar in that both call for the European firm to adopt the American partner’s design for a new generation of computer systems based on high-powered RISC computer chips. RISC--reduced instruction set computing--is already the chip technology of choice for engineering workstations and is expected to find its way into everything from palm-top PCs to supercomputers over the next decade. Olivetti will now use Digital’s RISC technology, known as Alpha, throughout its product line, just as Bull will use IBM’s competing RS-6000 RISC chips.
Digital already sells some Olivetti-made PCs, and there has been speculation in the European press for months that a broader agreement was in the works.
Despite extensive government support programs, the entire European computer industry has been in trouble for the last two years and has been forced to look for overseas partners. To the alarm of many Europeans, ICL of Britain and Nokia of Finland have both been taken over by Fujitsu Ltd. of Japan, and Philips of the Netherlands last year sold its computer division to Digital.
While such agreements as the DEC-Olivetti and IBM-Bull pacts might once have raised hackles among politicians on the Continent, these deals are now considered a positive alternative to Japanese or American takeovers.
Olivetti Chairman Carlo De Benedetti--who criticized the IBM-Bull arrangement--said he had discussed an alliance with IBM as well but rejected it because it would have meant a loss of independence. A previous alliance between AT&T; and Olivetti didn’t work out as planned, and in 1989 AT&T; traded its 22% stake in Olivetti for shares in a De Benedetti-run holding company.
Digital has been beset by losses, layoffs and management turmoil over the last year, stemming largely from the industrywide migration away from large, proprietary computer systems and toward standardized desktop machines. But the Maynard, Mass.-based company still has more than $1 billion in cash and has been eager to expand its presence in Europe and promote Alpha, which it considers the key to its future.
Like IBM and other RISC vendors, Digital wants as many companies as possible to sign up for its chips.
Friday’s agreement makes Olivetti the first mainstream computer company to go with Alpha.
The agreement appears to be a blow to computer maker Silicon Graphics, which will complete its acquisition of another RISC vendor, Mips Computer Systems, on July 1.
Olivetti had been an early supporter of the ACE initiative, a coalition of companies that planned to use the Mips chips, and now sells some Mips-based machines.
But ACE is now virtually defunct, and Olivetti is set to go with Alpha for the long term.
