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IBM "in Talks to Buy Sequent".

By William Fellows

IBM Corp is reported to be talks to buy Sequent Computer Systems Inc, the Beaverton, Oregon manufacturer of Intel Corp-based commercial servers. It's not the first time the rumor has been heard but yesterday the Wall Street Journal reported a deal could be announced in the next few days.

Before news of the negotiations broke, Sequent was valued at around $640m, while its expected 1999 revenue is about $840m. Its stock has been in the dog house because it has been struggling to compete with much larger vendors. IBM could therefore pick up Sequent for a song. Sequent stock closed yesterday at $17.56, up $3.56 or 25.45%. Nasdaq said Sequent declined its request to comment publicly on its stock's activity. Both IBM and Sequent declined to comment.

Buying Sequent would be a neat way for IBM to quickly extend its growing commitment to the business of building high-end Intel servers running Unix or NT. Sequent is already a partner in IBM's Project Monterey, which is developing a version of IBM's AIX to run on Intel servers. Both Sequent and Santa Cruz Operation Inc are contributing technology to Monterey and both will OEM the resulting work for their own markets.

Currently, the only way to build servers with more than eight processors is through clustering or the ccNUMA distributed shared memory technology offered by Sequent and a handful of others. Recently, Sequent has been touting its ability to sell high-end servers running NT, or NT co-hosted on a Unix server, although customers say that's been a way of getting a foot in the door.

Michael Prince, IT chief at Burlington Coat Factory, and a key Sequent customer, says such an acquisition would be a good thing if IBM maintained Sequent's highly-focused sales team. If it is dismantled, or IBM treats Sequent the way Compaq Computer has handled DEC, then there will be less incentive to buy again, according to Prince. He says Sequent's NT/Unix play has some attraction when front-end web applications can run on NT and back-end programs on Unix. Other Sequent customers include Ford Motor and Boeing.

Analysts we spoke to said IBM would have to be careful to pitch an acquisition the right way so as not to put its PowerPC business at risk. Sequent servers are perceived as being more focused on the commercial application market than IBM's own RS/6000 Unix servers systems, they said. The last thing IBM needs is another round of PowerPC-bashing in a market very sensitive to opinion-makers. They wonder also about the appeal of Sequent's ccNUMA architecture. ccNUMA is a technology IBM has experimented with in house for some time but has thus far decided is not commercially viable. Nevertheless, the RS/6000 business is the worst performer in IBM's server group and an area in which it could do with much improvement.
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Publication:Computergram International
Geographic Code:1USA
Date:Jun 30, 1999
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