Compaqs Surprise Partner

PC giant quietly subcontracts work to IBM as part of $1B U.S. Postal Service contract.

Compaq Computer continues to deliver the goods to the U.S. Postal Service, but not without IBMs help.

Compaq, which has worked with the postal service since 1994, says it has won a new 5- to 10-year contract worth up to $1 billion with the postal service. But the struggling PC giant also says IBM will work as a subcontractor on the deal, providing undisclosed products and services to the postal service.

Compaqs victory underscores the hardware veterans greatest challenge going forward: Compaq remains a respectable force in the rapidly maturing hardware market, but lacks IBMs breadth of products and services.

Compaqss proposed merger with Hewlett-Packard is an attempt to eliminate those shortcomings. However, quarterly financial results reveal that the proposed Compaq/HP combo would not rival IBM Global Services in size or reach (see Smart Partner, Sept. 10, p. 10).

In the meantime, Compaq is willing to work with IBM to win business. The U.S. Postal Service deal includes Windows- and Intel-based IT solutions (translation: Compaq notebooks, PCs and servers).

The new contract, known as ADEPT2, is a "re-compete" of a contract first awarded to Compaq in 1994, according to the PC giant. Under terms of the original deal, Compaq delivered more than 32,000 servers, 180,000 desktops and 50,000 notebooks to the U.S. Postal Service.