1
 Tandem Computers Inc.,
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 preparing to fight with International Business Machines Corp. for a piece of the mainframe business, 
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said 
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it expects to post higher revenue and earnings for its fiscal fourth quarter 
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ended Sept. 30.
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 Tandem said 
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it expects to report revenue of about $450 million and earnings of 35 cents to 40 cents a share.
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 The results, 
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which are in line with analysts' estimates, 
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reflect a continued improvement in our U.S. business, 
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said James Treybig, Tandem's chief executive officer.
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 In the year-earlier period, Tandem reported net income of $30.1 million, or 31 cents a share, on revenue of $383.9 million.
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 Tandem expects to report the full results for the quarter next week. 
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Analysts have predicted 
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that the Cupertino, Calif., company will report revenue of $430 million to $460 million and earnings of 35 cents to 40 cents a share.
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 Commenting on the results for the quarter, 
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Mr. Treybig said 
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the strength of the company's domestic business came as a surprise to him, 
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noting 
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that sales in every region of the U.S. exceeded our plan.
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 The company's U.S. performance was helped by a record quarter for new customers,
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 he said.
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 Tandem makes fault-tolerant computers
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 -- machines with built-in backup systems -- 
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that run stock exchanges, networks of automatic tellers and other complex computer systems.
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 Tomorrow the company is scheduled to announce its most powerful computer ever, 
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which for the first time will bring it into direct competition with makers of mainframe computers.
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 Tandem's new high-end computer is called Cyclone.
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 Prices for the machine, 
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which can come in various configurations,
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 are $2 million to $10 million.
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 Analysts expect the new computer to wrest a hefty slice of business away from IBM, the longtime leader in mainframes.
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 We believe
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 they could siphon perhaps two to three billion dollars from IBM over the next few years, 
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said George Weiss, an analyst at the Gartner group.
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 That will spur Tandem's growth.
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 I'd be disappointed 
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if the company grew by less than 20% next year, 
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said John Levinson, an analyst at Goldman, Sachs & Co.
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 IBM is expected to respond to Tandem's Cyclone 
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by discounting its own mainframes, 
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which 
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analysts say 
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are roughly three times the price of a comparable system from Tandem.
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 Obviously IBM can give bigger discounts to users immediately, 
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said Mr. Weiss.
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 But Mr. Treybig questions 
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whether that will be enough 
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to stop Tandem's first mainframe from taking on some of the functions 
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that large organizations previously sought from Big Blue's machines.
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 The answer isn't price reductions, but new systems, 
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he said.
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 Nevertheless, Tandem faces a variety of challenges, the biggest
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 being that customers generally view the company's computers as complementary to IBM's mainframes. 
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Even Mr. Treybig is reluctant to abandon this notion,
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 insisting 
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that Tandem's new machines aren't replacements for IBM's mainframes.
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 We're after a little bigger niche, 
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he said.
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