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Note 542.3 Sequoia wants to buy DEC's FT 3 of 6
DANGER::YEE 171 lines 9-SEP-1994 13:35
-< Readers Choice Article -Sale of FT Systems Assets >-
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From: NAME: Readers Choice
FUNC:
TEL: <CHOICE.READERS AT A1 at SALES at MRO>
To: See Below (Distribution List Truncated)
From Ray Paddock, AKO, 244-7334
SALE OF FAULT-TOLERANT SYSTEMS ASSETS
INTERNAL BRIEFING
Background
Digital has been shipping fault-tolerant systems for the past four
years. All systems shipped to date have been VAX systems running the
OpenVMS operating system, and have been compatible with the rest of the
VAX/OpenVMS family of products. The systems developed have won many
awards and have been well received by Digital's customers.
Digital has been developing a next-generation family of fault-tolerant
products based on the Alpha AXP microprocessor running the DEC OSF/1
operating system. These products share the same basic architecture as
their predecessors, and are completely compatible with all other Alpha
AXP DEC OSF/1 systems. The first of this family, known internally as
Tradewind, is nearing completion. While this product is still several
months away from public announcement and customer availability, a
number of customers have been briefed under non-disclosure agreements,
and have been very positive in their feedback. This is especially true
for customers in the telecommunications industry, which is the largest
market for these products.
The development of fault-tolerant systems requires highly specialized
engineering talent and significant investments. As Digital looks down
the road to a new generation of products, it must consider how best to
deliver state-of-the-art fault-tolerant systems that satisfy its
customers' requirements.
The decision
In early May, Digital management reviewed the fault-tolerant program.
It was decided at that time that the best way to ensure a competitive
product for our customers was to identify and work with a company that
specializes in fault-tolerant systems. It was also decided at that
time that the Tradewind product had many characteristics that our
customers want today, and that this product should be commercially
exploited.
With these decisions made, a cross-functional team was charged with
finding a company to work with in the area of fault-tolerant systems.
The results
Digital has selected Sequoia Systems, Inc., of Marlborough, Mass., to
work with in the area of fault-tolerant systems. The companies have
signed a non-binding Letter of Intent and are moving toward a
definitive agreement.
The Letter of Intent states that Sequoia would purchase all assets
related to Digital's fault-tolerant systems business. This includes
the assets related to the current VAXft 810 as well as the unannounced
Tradewind product. Sequoia would develop a strategy for the VAXft 810
and announce it shortly. Sequoia would complete the Tradewind product
under development without modification and in line with the current
schedule.
Once the sale is complete, Sequoia will have sole responsibility for
the products, their distribution, their ongoing development, and the
development of a next-generation product.
What this means to Digital
The sale of the assets of the fault-tolerant business represents
another step in Digital's stated strategy of focusing product
development resources on core platforms and products with high-volume
market potential. It also would ensure that Digital customers who need
this technology will continue to have access to it, from a company that
specializes in high-availability systems.
In addition, the agreement with Sequoia would represent yet another
strong outside endorsement of Digital's Alpha AXP technology. In a
public statement, Ron Gellert, Vice President and General Manager
Sequoia's Systems Business Unit, said, "The addition of an Alpha AXP
fault-tolerant platform to augment Sequoia's existing product strategy
will enhance our competitive position . . . Digital's Alpha AXP chip is
an exceptional processor and can be an important addition to Sequoia's
product mix, providing a high-performing fault-tolerant server running
industry-standard software."
What this means to Digital's customers
Many customers, especially those in the telecommunications industry,
have been waiting for the Tradewind product now under development. The
performance, price/performance, and complete compatibility with all
other DEC OSF/1 Alpha AXP systems have made it ideal for many projects.
This agreement would not affect the product that will be delivered and
would have a minimal impact on the delivery schedule.
The customer would, of course, see some changes. The logo on the system
would no longer be Digital's. The sales team and technical support
would come from Sequoia. In many cases, a Digital account manager would
be involved in the sale of fault-tolerant systems along with other
systems from Digital. However, Sequoia would have sole responsibility
for executing the sale of the fault-tolerant products. The final change
customers would see is in the service contract. Sequoia would offer a
range of maintenance services for their fault-tolerant systems. If a
customer buys on-site services, Digital's Multivendor Customer Services
organization will likely provide those services as a subcontractor to
Sequoia.
What this means to Digital's sales organization
Both the current VAXft 810 and the unannounced Tradewind product are
particularly appealing to Digital's customers because of their
performance characteristics and their compatibility with other members
of their respective families. It is likely, therefore, that within
Digital's major accounts, the Digital account manager would be the
first to become aware of a customer requirement that can best be met
with a fault-tolerant system. Since Sequoia would have sole
responsibility for all selling efforts, a mechanism would be put in
place to pass the lead onto the Sequoia sales team. It is anticipated
that, since Digital would benefit financially from identifying and
closing opportunities, appropriate financial incentives would be
instituted for the Digital account manager that passes new leads on to
Sequoia.
Summary
The announcement made this week was specifically on the signing of a
Letter of Intent. A Definitive Agreement will not be achieved for
several weeks, although we expect that this goal will be achieved. The
LOI covers the VAXft 810 system and the unannounced Tradewind product.
The plan calls for the transfer of all assets of Digital's
fault-tolerant business to Sequoia Systems, Inc. Sequoia would have
sole responsibility for the marketing, sales, development, and
maintenance of the products. This plan does not affect any of the
features or attributes of either of the products.
This plan enables Digital to focus financial and management resources
on development of other core products with minimal disruption in the
delivery of fault-tolerant products to customers.
With Sequoia's technical strengths in fault-tolerant systems, customers
can have confidence that their requirements for fault-tolerant systems
will be met now and in the future.
Contacts: David Lynch, Corporate P.R., @MLO, DTN 293-5166
Ruth Porter, Analyst, ASABET::PORTER, DTN 223-2960
Distribution:
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