Goodbye to Digital, howdy Compaq East

Littleton, Mass. - B.J. Johnson is home again.

He is moving back into the same King Street office building in Littleton, Mass., where he started Digital Equipment Corp.'s network systems integration business 14 years ago, and will even be working on the exact same floor.

This time, though, he is establishing an East Coast network outpost for Compaq Computer Corp. in the form of the new Network and Access Communications (NAC) group. The unit, to be headquartered in New England, will spearhead the company's bid to be the major player in networking. The East Coast move and details of the division are expected to be announced in several weeks.

Despite the bold move, Compaq doesn't plan to become a leader by challenging companies such as Cisco Systems, Inc. and 3Com Corp. product-for-product, Johnson said.

Rather, Compaq will pick and choose the gear it needs to ensure quality of service across LANs and WANs and to focus on key vertical markets such as manufacturing and finance.

Compaq also hopes to establish beachheads with ISPs by offering hardware that will let ISPs offer IP-based virtual private network services.

Part of Compaq's plan includes leading customers of Digital's Network Solutions Integration Services (NSIS) to the network promised land. Compaq bought Digital, including NSIS, earlier this year.

That means developing hardware and software that lets Digital users assign priorities to applications at the desktop and have the rest of the network give them the same priority.

"We have a Digital installed base, which we clearly want to pull forward and move into the concept of end-to-end communications at the application level," Johnson said.

To do that, Compaq will not need to develop ATM switching because Compaq has settled on Gigabit Ethernet for enterprise backbones, Johnson said. And Compaq has no interest in supplanting Cisco as the preeminent router maker. "We don't need to do anything that somebody else is really good at," he said.

Instead, Compaq will continue its philosophy of "buy if you can, build if you must." Other vendors already make many products that bear the Compaq label - including Compaq Gigabit Ethernet switches, which are made by Extreme Networks, Inc. "I only invent that which I cannot get on the outside. Anything we design and do is with the intent of setting us apart from other people," Johnson said.

Ashok Kumar, an analyst with the Piper Jaffrey consultancy in Minneapolis, took a harsher view. He said Compaq has no unified vision for networking, and its strategy is a matter of "trying to stitch together different vendors. Nevertheless, there is a great opportunity here for the company on the vendor-integration side," Kumar said.

The office here, which Johnson calls Compaq East, represents Compaq's first major outpost outside Texas. Because Compaq has already pumped dry the talent in Houston and Austin, Johnson said he hopes to draw new expertise from the network-savvy local work force.

"It's analogous to moving to Silicon Valley," said Frank Dzubeck, president of Communications Network Architects, Inc., a consultancy based in Washington, D.C. "There is a much more ready pool of people up in New England. Especially LAN people, which is what he was after."

Locating NAC here will also help smooth out Compaq's absorption of Digital's NSIS and provide a convenient spot to deal with Cabletron Systems, Inc., Johnson said. With its Digital purchase, Compaq inherited an NSIS obligation to buy $1.1 billion worth of gear from Cabletron over the next three years. Johnson said he will reveal next month that shopping list and whether the equipment will be labeled with Compaq or Digital logos (NW, June 29, page 1).

In the meantime, Johnson will move back into the same building, with his NAC group, which will include Compaq's remote access unit, formerly Microcom, Inc.; its network interface card business, formerly Thomas-Conrad; and its low-end switching unit, formerly Networth. While Johnson's office is in the same building, and on the same floor, it has one key advantage: "It has a better view this time," he said.

Senior Editor Robin Schreier Hohman contributed to this report.

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