July 13, 1999

IBM buys Sequent for $810 million

By DAVID E. KALISH
AP Business Writer

NEW YORK (AP) -- IBM announced Monday it would pay $810 million for Beaverton, Ore.-based Sequent Computer Systems Inc., a struggling maker of powerful business computers, in a cash deal that aims to fill an important slot in IBM's product line.

Sequent is a leading seller of high-end computers and software that use Intel Corp.'s microprocessor chips. IBM, the world's largest computer maker, plans to use Sequent's specialized technology in networked machines it will pitch as an inexpensive substitute to traditional mainframes that handle the biggest computer jobs, such as tracking inventories or millions of bank transactions.

Though Intel chips are not widely used as the brains in the heaviest-duty computers, that could change next year, when the No. 1 chip maker releases a long-awaited next-generation chip called Merced intended to work with big business machines.

Despite Sequent's leading technology, the company has succeeded only in attracting a handful of big corporate customers. Its financial results have been viewed by Wall Street as mediocre. Its main competitors are Sun Microsystems and Hewlett Packard.

IBM already is allied with Sequent and Santa Cruz Operation Inc. to produce a new version of the Unix operating system for Intel's high-powered Merced computer chip. That work helped spark IBM's interest in buying the company, said Robert Stephenson, an IBM senior vice president who heads its server division.

IBM plans to sell Sequent's computers as well as integrate Sequent's technology into its own machines. Beaverton-based Sequent has about 2,500 employees worldwide and 1,500 in Oregon. No lay offs are expected.

"This is all about growth and not about consolidation or cutting jobs," said Stephenson, adding that he expects IBM to expand operations in Oregon.

IBM will pay $18 cash for each of Sequent's outstanding shares, plus additional cash. It hopes to complete the transaction this summer.

IBM shares were down $1.43 share at $135.93 on the New York Stock Exchange this morning. Sequent's shares were down 18 cents a share at $17.25 on the Nasdaq Stock Market.