I was a contractor at Intel involved with the purchase of the Fab in Hudson Mass from DEC. I confirm that Compaq really wanted Digital Field Services. The problem Compaq faced was the fact that the Digital Fab 5 in Hudson Mass was loosing money every day of operation. DEC tried to sell the Fab to Intel, but was rebuffed. So, they decided to sue Intel instead. The lawsuit was quickly settled and DEC Fab 5 became Intel Fab 17.
As part of the settlement with the FTC & SEC, Intel agreed to manufacture the Alpha for seven years. That was a condition of the sale imposed by the regulators, not necessarily something Intel may have wanted. As time went by, many of the design team was absorbed into Intel and the Alpha was quietly discontinued.
Yup, it was a typical case of my enemy becomes my friend. What prompted the suit originally was that DEC claimed that Intel, in developing Pentium, had violated several patents DEC had acquired during Alpha development. For those interested, a detailed and mostly accurate history of the demise of DEC is here.