NEW YORK, Sept 26 – By earmarking $100 million for investments in genomics start-ups, Compaq Computer Corporation (NYSE: CPQ) is poised to earn big returns from picking winners as well as from generating increased revenues by creating more demand for its computers, experts said Tuesday.
“The more that these computer companies can drive genetic sciences and bioinformatics, the more computers they can sell,” said Alexander Hittle, genetic sciences analyst at AG Edwards.
Unlike IBM’s (NYSE: IBM) previous announcement to invest $100 million in its internal life sciences program, Compaq said Tuesday it would invest the same amount of money both directly and indirectly in small genomics and bioinformatics companies.
Its first move in this direction would come in the form of a “significant investment” in Applied Genomic Technology Fund, a venture capital fund based in Cambridge, Mass., Compaq said.
“It’s very clear what we are planning to do here. We are planning to make equity investments,” Ty Rabe, director of high-performance technical computing solutions at Compaq said. “This is a really exploding area.”
And Rabe also noted that the equity investments would help Compaq to entice new customers among the smaller genomics players.
“We will be working with AGTC to present Compaq as a recommended IT solution provider to these small companies,” said Rabe, adding that Compaq also intended to provide start-ups with early access to its AlphaServer systems and StorageWorks Systems.
The Houston-based company’s high performance systems are already crunching data for come of the biggest genomics players, such as Celera Genomics (NYSE:CRA), MIT’s Whitehead Institute, and the Sanger Centre.
Nevertheless, some analysts saw the move as a defensive tactic to keep competitors out of Compaq’s turf.
“I don’t think it’s necessarily going to give Compaq any incremental business, because they pretty much are the overwhelming leader in the space,” said Winton Gibbons, genomics sector analyst at William Blair. “From talking to their potential customers, I think they already have the business.”
But industry insiders applauded the announcement, noting that no matter what Compaq's motivations, the increased attention would benefit the entire sector.
Maciek Sasinowski, president and CEO of bioinformatics start-up Incogen, said, “Any announcement like that, the one from IBM or the one from Compaq, is great for the field because it raises awareness.”