NBR on Dell/IBM deal-->Quite an interesting take from NBR.
In case you missed the news this evening.
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03/04/99:IBM & Dell Make A Mega Manufacturing Deal
SUSIE GHARIB: Also fast-growing, IBM. Big blue's stock bounced up more than four points today on news it will sell $16 billion of components to Dell Computer. Scott Gurvey has more on that tech deal.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: At $16 billion over seven years, this is one of the largest manufacturing agreements ever for the computer industry. Dell will buy IBM disk drives, memory chips, network cards, and displays to use in Dell computers. The companies will also cross-license patents and collaborate on future technology.
MICHAEL LAMBERT, SR. VP, DELL COMPUTER ENTERPRISE SYS. GP.:At some point in time in the not-too-distant future, we might wind up being their largest customer. And so if they're customer responsive, they're going to be "incentivized " to work with us.
GURVEY: That would be a change for IBM, but one the company may now welcome as it moves to exploit its leading-edge technologies, which have not always led to market-leading products.
JAMES VANDERSLICE, SR. VICE PRESIDENT, IBM TECHNOLOGY GROUP: We offer the leadership technology to our own divisions as well as external customers, and the whole thought behind that is there are other things that differentiate our products.
GURVEY: But in some areas IBM has been unable to differentiate. While Dell is growing at a 50 percent rate, IBM reportedly lost money on personal computers last year. The company advised that this agreement will not have a material impact on earnings in the near term. But many believe IBM wants to move more toward services and components, and away from systems, particularly at the low end. This agreement will put pressure on Compaq (CPQ), HP (HWP) and other PC makers to find similar partners. It will also put pressure on other component suppliers like Seagate (SEG), 3Com (COMS), and even Intel. Neither IBM CEO Lou Gerstner nor Dell CEO Michael Dell were present for the announcement, and the executives who were would not speculate on where this nonexclusive arrangement might lead. Some analysts see IMB selling Dell's desktop systems to its own customers. Others expect Dell to turn to IBM to provide service support for its products. That may still come.
ROBERT MALBERY, CHIEF EQUITY ANALYST, BRIEFING.COM: There was no, basically agreement that Dell would use IBM. services, which is what a lot of people were anticipating on the deal. I think that's a potential going forward as these two companies build a closer relationship.
GURVEY: The stock market's bullish reaction to this announcement indicates investors believe a lot more will come from this relationship. The companies have seven years to figure out what that more will be. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
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