Robert Palmer: Cashing In Dec's Chips

ROBERT PALMER IS CLEARING the DEC. Digital Equipment's chairman, president, and CEO, who in 1992 staked DEC's future on the Alpha computer chip, announced on Oct. 27 that he's selling Digital's chipmaking business to Intel for $700 million, partly to settle a high-stakes patent-infringement suit.

Digital's gain could top $1.5 billion, including discounts on the Pentium chips DEC buys from Intel and royalties from Intel for using Alpha technology. But the deal's real value to Digital lies in its sale of a chip plant that was costing more than $200 million a year to upgrade.

Without a lawsuit threat hanging over Intel, a deal was "very unlikely," Palmer says. But in June, soon after DEC sued Intel for patent infringement, he and Intel President Craig Barrett met in Chicago to discuss a deal. Talks continued, and the two outlined the deal in August in Dallas.

Analysts say shedding chipmaking makes DEC a more attractive merger candidate. But Palmer says he's not interested. "We're intent on managing our business as an independent operation," he says.