DELL/IBM deal-The Forrester Missive- 'Slam-dunk for both companies' Forrester Research.
Drew:
Here is an 'executive brief'on the Dell/IBM deal from Forrester Research. I think I rather listen to these guys than some schmuck biz rag writer or Wall Street Analyst.
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IBM Powers Dell To New Levels
March 4, 1999
IBM's $16 billion, seven-year deal to supply components to Dell is a slam-dunk for both companies. But these firms should take their alliance further -- IBM could fill Dell's services gap and Dell could provide a face-saving way for IBM to exit PC manufacturing.
by Carl D. Howe
IBM and Dell today announced a far-reaching agreement whereby IBM will provide disk drives, semiconductor technology, network cards, and displays to Dell over the next seven years. Worth more than $16 billion, this is the largest OEM deal ever in the PC industry.
This Is A Great Deal For Both Companies
Forrester thinks that this was a smart move for both companies.
This deal's impact will be felt by the industry in six months as:
Dell integrates IBM's world-class technology. With IBM boasting world-class storage technology and semiconductor technology nearly a year ahead of Intel's, IBM's technology will differentiate Dell from the typical Wintel box vendor.
IBM gets a hot showcase for its OEM technology. OEM components sold to other companies already account for $6.6 billion in revenue to IBM. The Dell deal will put IBM components into market-leading products, power an annual growth rate of more than 40% for the IBM components division, and help propel IBM past its current 3% revenue growth.
IBM And Dell Should Go Further
Forrester sees this deal as just the first step in a long-term alliance between the two companies that could crown Dell as the new king of the PC industry, with IBM providing the bulk of its technology.
To cash in on the potential of this deal:
Dell should tap IBM for services. Dell needs comprehensive integration services to ramp up its server business to compete with Compaq. IBM Global Services could provide those services to Dell customers in a heartbeat and remove the final barrier to Dell's domination of PCs.
IBM should use Dell to exit PCs. IBM doesn't need low-margin PCs to grow its services, software, and OEM businesses. IBM should sell off its ThinkPad and Aptiva labels to Dell, integrate rebadged Dell PCs into its price list, and focus entirely on providing comprehensive high-margin solutions to its gold-plated customer list. By removing low-margin PC manufacturing from its portfolio, IBM could remove a big drag on its corporate revenues and profits.
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