Boston, MA -- As reported by the Associated Press, Intel Corp. announced
that it will purchase Digital Equipment Corp.'s Alpha computer chip
manufacturing operations as part of a deal to end a legal battle that began
when Digital accused Intel of stealing technology.

  The multi-year agreement includes sale of Digital's semiconductor
manufacturing operations to Intel for approximately $700 million,
cross-licensing of patents, supply of both Intel and Alpha microprocessors
and development of future systems based on Intel's 64-bit microprocessors.
No other financial details were disclosed.

  "This agreement meets both companies' needs," said Craig Barrett,
president and chief operating officer of Intel. "We are pleased to get
alignment with one of the world's major computer companies on IA-64
microprocessors and to let the marketplace judge our work."

  The deal could help Intel strengthen its efforts to expand beyond the PC
and into more powerful machines used by business. Although Digital will
lose its flagship product, it also divests intself of worries about
increasing its disappointing market share. It also can invest the money in
its computer business.

  Analysts said the deal allows Digital to hold on to some measure of
independence while ridding itself of its Hudson plant, which operated under
capacity and was a cash drain on the company. "It is absolutely good for
Digital. It means that DEC gets an albatross out from under its neck," said
Laura Conigliaro, an analyst with Goldman Sachs. "And Intel gets itself out
from under a lawsuit."

  At stake in the fight between the high-tech companies was who would
control technology vital to improving speed and power of high-end computer
systems used by business. Digital sued Intel for patent infringement in
May. In the suit, DEC accused the chip maker of unlawfully using Digital
technology in developing its dominant Pentium processors, introduced four
years earlier.

  "This agreement brings issues between the two companies to a resolution
that benefits customers in many important ways," said Digital Chairman
Robert B. Palmer. "It ensures long-term availability of Digital's
Alpha-based offerings for Open VMS, Digital UNIX and Windows NT customers.
In addition, Digital will develop Digital UNIX and Windows NT offerings on
the IA-64 architecture."

  Intel will provide Intel products and comprehensive technical support to
Digital consistent with practices for other major Intel OEMs. Digital will
develop a full line of systems based on Intel's IA-64 processor family.
Digital will port, with technical assistance from Intel, its Digital UNIX
to Intel's IA-64. Intel will obtain rights to manufacture and sell other
non-Alpha Digital semiconductor products.

  Intel's payment to Digital ensures that money from Pentium and other
chips will continue to roll in. "We are talking of four business days of
Intel revenue for this settlement after five months of anxiety. This is
very low-cost insurance for them," said Richard Doherty of the
Envisioneering Group in Seaford, NY.

  Industry observers commented that Digital's move highlighted its
frustration in trying to boost sales of Alpha chips, which in the five
years since being introduced captured less than 1 percent of the market.
Intel, whose chips already are the "brains" of 85 percent of the world's
personal computers, has been moving aggressively into the market for more
powerful business machines -- where Digital competes.

  Digital, the country's No. 4 computer maker, filed its suit about a week
after Intel unveiled its latest chip, Pentium II. Intel first hinted that
it might stop selling to Digital -- which uses Intel chips as well as its
own in its computers. It then filed a countersuit accusing Digital of
patent infringement.

  The settlement may also be an indication that Digital's claims were
stronger, analysts said. "It's fairly certain that Intel would not have
decided on its own to buy semiconductor manufacturing operations in
Massachusetts, so clearly there was merit to Digital's lawsuit," said Drew
Beck of Cowen & Co. "They induced Intel to bite the bullet."

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