It can be argued that the one good thing the PC market - with its relentless tendency to declare gross margins null and void - has done for IBM is to help get rid of the now misplaced vanity it displayed until recently.
It is almost as if the punishing nature of the market over the past few years has finally forced IBM to grow up to the fact that it cannot do it all on its own after all.
Last week marked the most recent in the series of such public proclamations of alliance, when the giant disclosed publicly for the first time that not only had it forged a fresh agreement with Acer, but that it has had a long-term OEM deal with the Taiwanese vendor all along.
Under the additional pact - announced on 7 June - Acer will purchase hard disk drives, microelectronics, networking and display technology from IBM for integration into its own server, desktop and notebook computer products, at the cost of $8 billion over the seven-year agreement. Acer will also sell IBM technology, including hard disk drives, through its distribution channels.
In addition, IBM will have a reciprocal agreement with Acer to purchase PCs, notebook computers and thin clients in an extension of the existing outsourcing arrangement between the two companies, according to sources close to Acer.
In the era when no one ever got sacked for buying IBM, it was in Big Blue's interest to be seen as a jack of all trades, doing the one-stop shop tango with its customers. But over time, smaller, nippier companies went from merely mopping up the excess of IBM's spoils to becoming the dominant forces in areas where the giant has been too big and slow to react. It became within IBM's interest to team up with such companies.
This change in attitude has been evident in IBM's now overt desire to partner with any vendor that can cover the catchment areas Big Blue itself cannot reach.
To the industry, the vendor's disclosure of the alliance was only telling it what it already knew. Nevertheless, it must have been surprising to read in the official statement by James Vanderslice, senior vice president and group executive of IBM Technology Group, that: 'This alliance is an expansion of an already existing broad set of relationships between the two companies. Acer and the IBM Personal Systems Group currently have a multi-billion dollar agreement under which Acer manufactures IBM PCs.'
For Acer, this means two key things. First, the declaration will help the Taiwanese giant in its constant battle for own-brand credibility outside its home ground. For years, Acer and Stan Shih, its chief executive, have fought tooth and nail to be seen as a global PC manufacturer and purveyor of quality. The irony is that for some time it has been an OEM supplier to the big boys, but market perception has always been limited to a small south east Asian player. IBM's public endorsement could serve to rectify that narrow view.
Second, for the Taiwanese manufacturer, the extension of the IBM relationship comes at a time when it is needed the most. The implosion of the south east Asian economy 18 months ago was well publicised and even conglomerates such as Acer are still being dragged around in its wake.
At the end of April, Acer reported a 52 per cent slump in first-quarter net profit, although turnover was up. This was after it issued a profit warning and revised down 1998 net profits by 29 per cent. The agreement could result in IBM purchasing as much as $1 billion in displays from Acer.
For IBM, this latest deal gives it something to do other than sell badly into a PC market that would rather buy Compaq, Dell and Hewlett Packard.
Its abysmal performance in this area in more recent times, amid cries for it to pull out of PCs altogether, has forced it to re-evaluate the game plan. Now the emphasis is on software, services and OEM hardware sales from within its technology group, which consists of system storage, microelectronics, networking hardware, displays, embedded systems and printing systems units.
Significantly, all four OEM deals forged this year have come from within the technology group, which has also made pacts with Dell, EMC and Nintendo.
So, for IBM and others, a true global player will be defined by the alliances it pulls off. The law of comparative advantage is alive and well. The one-stop shop is dead. Long live the strategic alliance.
IBM TECHNOLOGY ALLIANCES THIS YEAR
Date forged - 4 March
Nature - Dell agreed to buy components and technology from IBM over a period of seven years. The deal, worth $16 billion, covers storage technology and potentially IBM copper chip technology.
Date forged - 4 March
Nature - Signed with EMC in an outsourcing pact worth about $3 billion over five years. EMC will purchase advanced IBM disk drives for incorporation into EMC's Symmetrix Enterprise Storage systems. Will include other IBM technologies in future, such as microprocessors and advanced custom chips. Deal also includes cross-patent licensing.
Date forged 12 May
Nature IBM signed a multi-year $1 billion technology agreement to support Nintendo's next home video game console, codenamed Dolphin. As part of the agreement, IBM will design and manufacture a 400MHz central processor featuring its 0.18 micron copper technology. The chip, dubbed the Gekko processor, is an extension of the IBM PowerPC architecture. Designed to be more powerful than those found in any current or planned home video game entertainment system, it is being touted to provide players with better graphics and more realistic action.
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