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To: John Carragher who wrote (7274)	7/28/1999 5:38:00 PM
From: John Carragher	Respond to of 17183

Analyst Says He Expects IBM To Build Big Computing Centers By JON G. AUERBACH Staff Reporter of THE WALL STREET JOURNAL BOSTON -- As part of a push to build up its business with hot Internet companies, International Business Machines Corp. is expected to build as many as five large computing centers in the U.S., according to Merrill Lynch & Co. analyst Steve Milunovich. Mr. Milunovich, who recently met with IBM management, said in a conference call Wednesday that the "mega centers" would provide computer hosting for Internet-service providers, application-service providers and sites such as eBay Inc. IBM worries that Sun Microsystems Inc., the leading provider of Web servers, will capture more business from Internet firms as they grow quickly, said Mr. Milunovich. IBM will begin building and rolling out the centers in the coming months, Mr. Milunovich said. He said he expects Big Blue to build about five centers in the U.S. and two or three in Europe. Mr. Milunovich also said that he expects IBM to continue selling personal computers. IBM's PC business lost nearly $1 billion last year, but the company has shown improving results in the first two quarters. Mr. Milunovich said management told him that the "numbers are beginning to work for them" in that business. "At this point I'm not looking for major divestitures," the analyst said. It has been a busy month for the Armonk, N.Y., giant: It agreed to buy Sequent Computer Systems Inc., a maker of powerful server computers used in business networks, for about $810 million and, in a bid to regain leadership of the market for high-performance data storage systems, late Tuesday announced plans to buy computer-networking company Mylex Corp. for about $240 million.

To: John Carragher who wrote (7274)	7/28/1999 7:14:00 PM
From: Bill Fischofer	Respond to of 17183

Re: Build vs. Buy The build vs. buy decision is one that most companies make all the time. The important part to understand about technology is that most of the real assets of any technology firm (especially for small firms) is contained in the heads of their people, so such acquisitions have to be on amicable terms or else the real assets will simply move on. Integration, however, always presents its own problems. I don't know enough about MYLX to comment on IBM's buyout of them. I'm sure it was done for the reasons you cite as well as, perhaps, for whatever patents MYLX may own in its area of expertise. I assume that MYLX agreed to this deal since they concluded that as a small player they were unlikely to survive on their own over the long term.