IBM-Dell: Will another shoe drop?
scott:
This is getting more interesting by the minute,NO? I see 4 reasons to think about and they are given below along with the complete article.
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A)...."It may indicate there's more going on between Dell and IBM.."
1)"IBM's PC organization is no match for Dell," Kay (Roger Kay-IDC) said. For its part, IBM compliments Dell's lack of high-end technology development and international services capability.
2)Dell was the No. 3 PC seller worldwide in 1998, behind Compaq (CPQ) and IBM, according to IDC data. Dell's been gaining market share fast while IBM had been struggling.
3)The Dell deal involves IBM technology, and that's sending some signals about change in the PC industry, some analysts say. It may indicate there's more going on between Dell and IBM.
4)The OEM deal "is good for both parties and poses quite a threat to everyone else," he said. "This could be the first round of an attempt at consolidation" among the top PC makers.
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By Emily Church, CBS MarketWatch
Last Update: 3:25 PM ET Mar 4, 1999 Movers & Shakers
Futures Movers
NEW YORK (CBS.MW) -- As if the race between the top four PC makers wasn't intense enough, it looks like Dell and IBM's $16 billion equipment purchasing deal may heat things up.
This isn't the services deal many assumed would be announced. IBM's services division -- a $30 billion revenue-generator for the Big Blue -- is a well known player.
The Dell deal involves IBM technology, and that's sending some signals about change in the PC industry, some analysts say. It may indicate there's more going on between Dell and IBM.
"This is a medium-significant announcement on the face of it," said IDC's Roger Kay, an industry analyst for the Framingham, Mass. consultancy. "But, I'm waiting for the second shoe to drop."
The two PC giants struck a 7-year pact for Dell to purchase storage, microelectronics, networking and display technology from IBM. The companies will also cooperate on technology development.
Cheap PC driver
Dell was the No. 3 PC seller worldwide in 1998, behind Compaq (CPQ) and IBM, according to IDC data. Dell's been gaining market share fast while IBM had been struggling.
But the strong sales of cheaper PCs are roiling the waters. Revenue for the PC makers fell by 2.3 percent in January against the year-ago period, as the average selling price fell to a new low of $953. This low is a 19.7 percent decline from the January 1998 average price of $1,187, according to PC Data.
The PC market conditions made Dell -- that mighty growth machine -- vulnerable.
"IBM's PC organization is no match for Dell," Kay said. For its part, IBM compliments Dell's lack of high-end technology development and international services capability.
The OEM deal "is good for both parties and poses quite a threat to everyone else," he said. "This could be the first round of an attempt at consolidation" among the top PC makers.
Lifting up the tent
To others, the significance of the deal is that IBM has made clear it's ready to sell the fruits of its renowned research and development labor and grow its $6.6 billion original equipment manufacture, or OEM, business.
"I don't think it's going to be only Dell" that starts to buy high-end technology from IBM, Goldman's Laura Conigliaro said.
IBM's likely going to use every avenue to push OEM technology, and that means its own PC group "is going to have to push harder and run faster," she said. Indeed, she added that in a conference call with analysts, IBM executives said they'd sell their technology to "the plankton and on through to the blue whale."
IBM used to put its own technology into its desktops and laptops. With the Dell deal "they've pretty much said that they will take those technologies to market and sell to anyone."
cbs.marketwatch.com
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