Additional info on EMC move from IBM. This shift can only be seen as bad news for HTCH unless they are making progress with SEG.
IBM's loss of EMC's disk-drive business is Seagate's gain
By Bolaji Ojo
Electronic Buyers' News
(05/15/00, 8:55 p.m. EDT)
EMC Corp. said it expects to increase the number of disk drives it buys from Seagate
Technology Inc., following
the inability of IBM Corp. to meet the OEM's demand for next-generation enterprise
storage devices.
A spokesman for EMC said in an interview earlier today that the company and IBM
have agreed to terminate
portions of an agreement that calls for EMC to purchase $3 billion worth of disk drives
from IBM over a period
of five years. EMC will continue to purchase IBM disk drives but without the
"financial targets" of the prior
agreement, the spokesman said.
Seagate, Scotts Valley, Calif., is already the biggest supplier of storage devices to
Hopkinton, Mass.-based
EMC. That relationship is likely to deepen in the months ahead, EMC said, because of
IBM's inability to keep up
with the crucial transition to 10,000-rpm drives.
"We continue to evaluate the best technology around -- that's what our customers expect
-- unfortunately, IBM
has had problems, which the company has widely acknowledged," said the EMC
spokesman. "We will continue
to buy disk drives from IBM but we are looking at other sources, including Seagate,
which is already EMC's
largest supplier."
Some other disk drive suppliers are likely to benefit from IBM's woes, which tamped
down the company's
hardware revenue in the first quarter. EMC also buys disk drives from Fujitsu Ltd. and
may have to turn to other
suppliers to fill some of the void created by IBM.
In March 1999, EMC agreed to purchase up to $3 billion worth of disk drives from
IBM. Since then, however,
the two companies have been locked in litigation involving Data General Corp., which
has been acquired by
EMC, and other lawsuits involving patent infringement allegations.
The agreement annulling the financial targets of the March 1999 contract is part of a
larger out of court settlement
of those lawsuits, EMC said on Friday. IBM also agreed to pay an undisclosed amount
to EMC as part of the
settlement.
EMC said in a statement on Friday that the two companies had agreed to dismiss all
"outstanding litigation ...with
no findings or admissions of liability." They also agreed to refrain from patent
infringement lawsuits for five years.
EMC had revenue of $6.7 billion in 1999, more than 85%, or $5.75 billion, of which
was derived from its storage
operations. While Seagate said EMC is one of its most important customers, the
company declined to disclose
the percentage of its revenue generated through sales to EMC.
A Seagate spokesman hinted that the company expects sales to EMC to increase and
that the two companies are
discussing opportunities created by the rupture of EMC's agreement with IBM.
"They [EMC] are a very strategic and important customer of Seagate," a spokesman for
the disk-drive
manufacturer said. "The majority of EMC products carry Seagate drives, and that is
very indicative of our
products strength and acceptance in the marketplace."
During a conference call in April to discuss its first quarter results with analysts, IBM
admitted that its hardware
division sales dropped partly because of problems in the hard disk-drive unit.
"We are working to resolve our problems in the 10,000-rpm server drive market, but
we have lost precious time
in a market that has little patience," the company said. IBM couldn't immediately be
reached for comment. |
