Compaq to buy Proxicom for $266m.

NEW YORK: Compaq Computer Corp. said on Thursday it would buy Internet

consulting firm Proxicom Inc. for $266 million, in a bid to strengthen its

services business. Compaq, the world's No. 2 personal computer maker, said it

would pay $5.75 per share in cash for the outstanding stock of Proxicom. It said

it sees the deal as neutral to earnings for the second half of this year, but

adding to earnings next year.

"The addition of Proxicom will strengthen Compaq's value proposition to

customers by supporting our already significant presence in telecommunications

and financial services markets, and extending our capabilities in markets

including retail, automotive, manufacturing, and media and entertainment,"

said Peter Blackmore, executive vice president, Worldwide Sales and Services of

Compaq.

Under the terms of the deal, Compaq will commence a tender offer for all

outstanding Proxicom shares. Any Proxicom shares not acquired by Compaq in the

tender offer will be acquired in a second-step merger. Compaq Global services is

already a $7 billion business. Proxicom was founded in 1991, and its share price

over the past year has fallen from a high of $57.25 seen last summer to trade in

the $4 range for the past few months.

Proxicom would become a wholly owned unit of Compaq. Raul Fernandez,

Proxicom's founder, chairman and chief executive, said, "We are delighted

to be joining Compaq with whom we've worked in both customer and partner

roles."

Proxicom last month was forced to slash 19 per cent of its workforce, or 227

employees, and lower its financial outlook.

(C) Reuters Limited 2001.