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Technology Stocks : IBM -- Ignore unavailable to you. Want to Upgrade?

To: JRH who wrote (3695)	8/10/1998 3:30:00 PM
From: Arrow Hd.	Respond to of 8220

Actually this is a very hard issue to argue since there are direct sales that are recorded by the IBM sales and services geographies (such as IBM North America, IBM Germany, etc.) where the DASD sales come into IBM through that organization and then there are the OEM sales whose revenue flows to IBM through the manufacturing division. In addition, some high end IBM DASD is manufactured by others such as Storage Tech. So it is incestuous and hard to measure accurately. IBM's OEM business has been a real growth area though. It is almost 6 billion whereas it was only around a billion five years ago. Most of the OEM business is in the areas of DASD (hard drives) and semi-conductors. IBM has been winning some significant DASD OEM deals this year. One of the reasons the drive sector is hurting is due to losses to IBM. I think Western Digital took it in the neck a few months ago losing an OEM contract to IBM. Due to the fact that IBM uses these drives themselves, and has to cost recover on a fully apportioned basis against the direct sales channel, the OEM pricing methodology can be a true incremental business case which pushes the legal deep discount test down to nothing so, if they so chose, IBM is in a very good position to win OEM business and at a decent profit.