Compaq Computer Corporation and Subsidiaries - Page 17




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          subcontractors operated in batch mode from 1990 to 1993.                    
          Compaq U.S. required unrelated subcontractors to meet Compaq U.S.           
          quality standards and guidelines in manufacturing PCA's.                    
               Compaq U.S. worked closely with unrelated subcontractors to            
          develop relationships that would improve quality and on-time                
          delivery.  In addition, members of the CMT visited the                      
          subcontractors or the subcontractors visited Compaq U.S. for                
          training, new product introduction, and problem resolution.                 
               In 1991 and 1992, competition among unrelated subcontractors           
          for PCA business was intense and was driven by technology,                  
          quality, service, price, and the ability to deliver on time.  The           
          competition was also global in scope as the Compaq U.S. unrelated           
          subcontractors that were located in the United States not only              
          competed against each other but also competed against Far East              
          subcontractors, including Compaq Asia.                                      
               Compaq U.S. purchases from unrelated subcontractors were               
          primarily on a consignment arrangement.  The unrelated                      
          subcontractors with which Compaq U.S. did business were as                  
          follows:  IEC; SCI Manufacturing, Inc. (SCI); Philips Circuit               
          Assemblies, Inc. (Philips); Victron, Inc. (Victron); Lung Hwa               
          Electronics Company (Lung Hwa); Citizen Watch Co., Ltd.                     
          (Citizen); Avex Electronics, Inc. (Avex); Solectron Corporation             
          (Solectron); Celestica; GSS/Array Technology, Inc. (GSS/Array);             
          Texas Instruments, Inc. (Texas Instruments); Jabil Circuit, Inc.            





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