Compaq Commits US$1B to Service Providers

BOSTON (03/21/2000) - Compaq Computer Corp. says it will commit more than US$1 billion to the service provider market this year, including a financing program, equity investments and partnerships aimed at businesses that offer Internet access and hosting to other providers and customers.

The financial commitment, announced today, includes $600 million that will be loaned to companies through Compaq Financial Services (CFS), $400 million for equity investments and $150 million for marketing and co-marketing. The initiative is for ASPs (application service providers), ISPs (Internet service providers) and NSPs (network service providers). Compaq has more than 1,000 service provider customers.

"A very small amount" of money earmarked for the initiative already has been spent this year, said Keith McAuliffe, vice president of Compaq's service provider business unit. He added that the amount already invested comes to less than 10 percent of the total and includes the $50 million that Compaq invested in Digex Inc. [See "Compaq, Digex, MS in Application Hosting Pact," Jan. 12.]The initiative announced today includes:

-- Financing for hardware, software and services for service providers. The $600 million [M] slated for this portion of the initiative will be available to companies globally and will include financing for larger businesses and for startups who want to expand.

Financing deals are likely to cover a wide range, McAuliffe said.

"A 5 (million) to 50 million range wouldn't surprise me. That's a pretty wide range, but you can imagine the range of sizes of companies here," he said.

-- CFS AssetEdge for Service Providers will offer financial asset management for existing and global service providers operating in North America and will include Web-based lease reporting and consulting services.

-- Service Provider Advantage Program, which will initially be offered in North America, but is slated for global expansion, McAuliffe said. The program will offer training, consulting and marketing help. This part of the program will be available either separately or in combination with other aspects of the initiative, such as the financing offering, he said.

-- An 800-number for North American service providers providing one contact point for information on programs, products, services and sales. The number will also be expanded for use outside of North America, McAuliffe said.

The expansion of programs initially available in North America will take place over the next several business quarters.

This year is particularly important for the service provider market in terms of companies investing in hardware and software, and for those needing services to either expand or get started, McAuliffe said. He cited market research company Cambridge, Massachusetts-based Forrester Research Inc. who has predicted the service provider market will reach $16 billion over the next three years.

"I think we're certainly prepared to continue to fuel growth in this marketplace, but this year is very critical," McAuliffe said, responding to a question about what Compaq intends to do regarding investments in the market after this year. "It might not be financing that's the challenge next year," he added.

Additional information on the initiative will be provided on Compaq's Web site at http://www.compaq.com/.

Compaq, in Houston, can be reached at +1-281-370-0670 or http://www.compaq.com/.

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