IBM has signalled its retreat from the PC manufacturing business after the vendor signed a seven-year, $16 billion technology alliance with Dell.
The initial agreement, believed to be the largest of its kind in the industry, is a non-exclusive technology partnership that will involve Dell purchasing IBM storage, micro-electronics, networking and display.
IBM has already been supplying about $350 million worth of computer components - mostly disk drives - to Dell annually.
The pact increases to an average of $2.3 billion each year and extends the range of products Dell sources from IBM to include monitors, chips and network adaptors.
But Stephen Minton, senior analyst at IDC, told PC Dealer: 'I don't see IBM staying in the PC market longer than two or three years. I think it will end up having a OEM arrangement with Dell.'
According to Mike Lambert, senior vice president of Dell's enterprise systems group, the alliance 'is more than just an arms-length relationship between buyer and seller, so there are a lot of other areas we could pursue'.
But Dr James Vanderslice, senior vice president and group executive of the IBM technology group, denied the deal was based around services: 'The agreement has nothing to do with services. It is about us working with Dell's product development team and it using our technology.'
But he added: 'It is more than a procurement agreement, it is a strategic alliance in which we are going to work together to do what our customers want. We will ensure the agreement goes beyond what we've so far decided.'
Shane Gallagher, managing director of IBM reseller First Stop Computers, said: 'My initial reaction from IBM's point of view is why does it need the business? But from Dell's point of view, buying from a key competitor gives the impression that it is not being an innovator, it is being an assembler. We can use that to our advantage.'
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