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Thursday, March 4, 1999 Published at 19:10 GMT


Business: The Company File

Dell and IBM in $16bn deal

The deal could boost IBM's revenues

US computer giants IBM and Dell Computer have announced a $16bn technology deal.

They claimed it is the largest agreement of its kind in the information technology industry.


BBC Business Correspondent Angela Garvey: IBM & Dell will share ideas and new technologies
Dell will purchase personal computer parts from IBM over the next seven years, including disc drives and memory chips.

The two firms said that they would also collaborate on the development of future technology for their products.

The move will help Dell develop the more expensive end of its product range, including notebook computers and servers, the large computers used by companies for networks.

Bonding

At a New York news conference, officials of the two companies said the pact was only the "beginning" of a close partnership.

"Our expectation is that this is just really the beginning," Michael Lambert, head of Dell's corporate systems group, said .

"For Dell, I think they gained technology they deeply needed," said David Takata, a securities analyst with brokerage Gruntal & Co.

"It reinforces IBM's role as a leader in the market supplying computer components," he said.

Technology shares soar

The deal sent US technology stocks soaring, including Dell and IBM shares.

IBM shares were up $9.75 to $176.50, while Dell rose $2.75 to $83.69. Other high tech companies like Microsoft, Intel, and Cisco Systems also gained.

The deal will provide a big boost to IBM's revenues. IBM has been struggling in recent years to maintain its profits with revenue growth stagnating.

Dell, the second largest computer maker in the US, also claimed that access to IBM's technology would enhance its competitiveness.

The deal could prove to be very significant for the computer industry, providing Dell with another weapon in its battle with rivals such as Compaq, the largest manufacturer of PCs.

Computer battle

For IBM it will consolidate its position in the computer consulting and maintenance industry, where it already earns annual revenues of around $30bn.

Other computer groups may now be tempted to join forces to take on the formidable new partnership.

The deal helped US computer shares bounce back after a difficult few weeks.

Stocks have been hit by concerns that sales are slowing, following disappointing results from Dell and Compaq.

Computer makers are under intense pressure to shave costs and become more efficient amid a price-cutting war.

This move may quell some of the fears about Dell's future performance.

Microsoft move

Meanwhile Hong Kong Telecom and Microsoft are set to form a strategic alliance to promote Internet services and electronic trading.

Microsoft boss Bill Gates and Hong Kong Telecom chief executive Linus Cheung are expected to announce the deal on 9 March.



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