Compaq, C&W Forge $500M Deal

PC manufacturer Compaq (NYSE: CPQ) and UK telecommunications company Cable & Wireless (NYSE: CWP) announced today that they will join forces in a five-year, $500 million (US$) agreement to provide Internet business services for small and medium-sized businesses.

The two companies said that they will sell Internet services and shared applications to the market on a global basis, starting first in the United Kingdom, U.S. and Europe, and then moving on to the Asian market.

The deal calls for Compaq to provide PCs, server platforms and storage architecture to support the venture, while Cable & Wireless — the UK’s second largest phone company — will provide services and support. The companies will share revenues from the venture.

Looking For Solutions

In crafting the deal, the companies said that traditional Applications Service Providers (ASPs) leave end users scrambling to solve a multitude of problems. Their venture, they said, will provide total solutions to e-business customers.

“This relationship with Cable & Wireless is an important step in the execution of Compaq’s strategy,” said Compaq CEO Michael Capellas.

“This relationship advances each of the key elements of our strategy: Creating the NonStopTM eBusiness solutions that enables our customers to operate 24/7; expanding our industry leading partnerships; and redefining Internet access with innovative products and services.”

Tipping the Apple Cart

Back in the pre-Internet days, any mention of a working partnership between American and British companies was often greeted with skepticism. American aggressiveness and British sensibility were seen by many to be strange bedfellows.

However, Cable & Wireless is now setting that notion on its head. By becoming one of the most aggressive telecommunications companies on the globe, the company is taking its cue from its historical past in striking deals worldwide.

Founded in the 1860s, Cable & Wireless is an amalgamation of telecom companies that ringed the globe as standard bearers of the British Empire. The company is now a $13 billion player in building a global network to deliver data and services to business customers.

The company has increased spending by 50 percent, and recently formed a unit to develop Internet business in Asia. Additionally, coffers are full after selling off One2One, a mobile telecom operator, to Deutsche Telekom for $13.5 billion.

Compaq appears to be rebounding from a rocky beginning of the year. The company has been losing PC market share to its rivals, but the Houston, Texas-based company is clearly intent upon building its services.

Compaq reported revenues of $9.2 billion in the third quarter and operating income of $140 million. Those figures include an $868 million charge and the $1.2 billion sale of a majority stake of Alta Vista to CMGI.

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