Details emerge on Compaq-Unisys server pact

Compaq is calling on another computer company for its most powerful Windows 2000 machines instead of building its own.

As previously reported, Compaq Computer has cut a deal with Unisys for 32-processor server computers running Microsoft's new operating system. Under terms of the agreement, Compaq will resell the servers under its ProLiant brand, but Unisys will make them. Compaq's chief executive Michael Capellas will announce the plan at a keynote address tonight in San Francisco, sources said.

Blue Bell, Penn.-based Unisys, which is know more for its services business, has been developing the technology behind the servers for more than two years. They will run Windows 2000 Data Center Server, which is expected to ship in about 120 days.

Compaq and Unisys are still hammering final details but are expected to reach a final agreement within 60 days. Sources close to the deal said Microsoft pressed hard for the announcement during the three-day Windows launch event.

The arrangement is expected to generate an additional $400 million in revenue for Unisys during the next two years. Compaq plans to ship the first 32-way ProLiant servers in the second half of the year.

The deal could be a big boost for Windows 2000 as it competes alongside large Unix servers from Sun and other computer makers.

The arrangement also gives Compaq a foothold against IBM, which in September acquired Sequent. Sequent makes a competing technology to that used by Unisys, which IBM has been quickly integrating in its server products.

Unisys' server technology, known as Cellular MultiProcessing, brings its own strengths, such as the ability to run disparate operating systems, such as Windows 2000 and Unix, on the same system. This could be attractive to larger corporations looking for an inexpensive way of supporting existing Unix installations, while investing in a server running Windows 2000.

The deal is potentially a big boost for Unisys, which has an attractive technology but doesn't sell large volumes of servers, an area where Compaq excels. In 1999, the Houston-based computer maker accounted for 31 percent of all server revenue, according to International Data Corp.

In conjunction with the Unisys announcement, Capellas will outline a broad change in server strategy during his 6:30 p.m. PST keynote.

Dubbed "eGeneration," the strategy is a three-phase advancement in Compaq's effort to deliver more robust Intel-based servers to corporate customers.

The launch of eight-processor ProLiant servers in August was phase one. Adding 32-processor servers later this year will mark the second phase. The final phase will focus on developing "total solutions" around 32-processor servers and Compaq StorageWorks systems and services.

It is unclear what impact the Unisys deal could have on Compaq's next-generation AlphaServer, code-named Wildfire, which is scheduled to begin shipping next month. Compaq last month told financial analysts it expects Wildfire to generate $1 billion in revenue this year.