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Dec: New Chip, New Partner. New Ball Game?

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With Alpha, DEC could stand out in a sea of RISC microprocessors

Since last summer, Digital Equipment Corp. has scoured the globe for a chipmaker to produce the ultra-fast Alpha microprocessor that is supposed to power its next generation of computers and revive its sagging fortunes. DEC was late to market, and the biggest manufacturers already were working with its rivals. It desperately needed a big name to prove the chip's potential. And on Mar. 16, DEC finally snared the best still available, Mitsubishi Electric Corp.

A marriage of last resort, perhaps, but the union still is critical for long-suffering DEC. Alpha is one of the new reduced instruction-set computing, or RISC, chips, which move faster because they can accomplish their tasks more efficiently. To make Alpha stand out in a sea of RISC chips, the $14 billion minicomputer maker hopes to put Alpha inside everything from consumer electronics to personal computers. Crows R. Edward Caldwell, DEC vice-president for semiconductor operations: "Digital and Mitsubishi have the capability to make Alpha successful in high-volume desktop, embedded computer, and supercomputer markets."

It's about time. With the astronomical costs of introducing new chips, few companies can go it alone--witness a host of alliances (table). For its part, DEC is spending $425 million on a single Alpha plant.

A manufacturing alliance is no guarantee of success. Simply put, "having lots of customers call up and say, `When can I get Alpha systems?' would be the more overwhelming factor," says George White, president of Corollary Inc. That phenomenon takes time. White recently chose Intel Corp.'s Pentium over Alpha for his company's next generation of computers. What's more, selling to computer designers will require systems engineering expertise--which Mitsubishi doesn't have, says Les Crudele, general manager of Motorola Inc.'s RISC Microprocessor Div.

What Mitsubishi does have going for it is sheer bulk. Initially, the company, with $28 billion in annual sales, will dedicate a single line to Alpha, producing the first chips in late 1994. But it may invest in new capacity. What's more, as the fifth-largest memory chipmaker in the world, it owns a sales network that DEC couldn't hope to duplicate.

Moreover, the enormous distribution potential in Mitsubishi's industrial group, or keiretsu, should allow it to introduce Alpha to markets where DEC's minicomputer expertise is valueless. "They could help develop the chip as an engine for office equipment," says Junichi Saeki, a computer industry analyst at Dataquest Japan. Adds Marc Brien at Japan-watcher Domicity Ltd.: "All things being equal, Mitsubishi companies will buy from Mitsubishi Electric."

The deal also clears the first hurdle to wooing PC companies, who see in multiple suppliers the promise of better technology and lower prices. Industry sales of RISC chips jumped 33% last year, to $395 million, says researcher Dataquest. But since unveiling Alpha in February, 1992, Digital has signed few big buyers--none high-volume PC makers.

HUSTLING RIVALS. Minicomputer buyers, meanwhile, should like the stability the deal brings the still-new Alpha AXP line. And Alpha computers should stay more competitive with Mitsubishi contributing new designs. "Up to this point," says Daniel W. Madrid, associate director of scientific computing at DEC custom-er Ciba-Geigy Corp.'s Pharmaceuticals Div., "high-cost components have kept them at adisadvantage."

Even as DEC regains lost ground, though, rivals are moving faster. A day after DEC's announcement, IBM, Hewlett-Packard, and Sun Microsystems roiled the waters with their plan to merge RISC operating softwares, which could allow developers to write one program that runs on machines from all three. Meanwhile, IBM's alliance with Motorola convinced Ford Motor Co. that its PowerPC chip would be inexpensive enough to work as a "controller" in future automobile engines. It's compelling evidence that DEC remains a step or two behind.Gary McWilliams in Boston, with Neil Gross in Tokyo

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