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To: Tony Viola who wrote (75343)	3/4/1999 2:25:00 PM
From: John Koligman	Respond to of 186894

Tony, post from the Dell thread with comments on the deal... John To: stock bull (107060 ) From: Mohan Marette Thursday, Mar 4 1999 12:35PM ET Reply # of 107149 Dissecting DELL/IBM deal----->Making beautiful music together...> SB: Here is a bit more details on the deal. ====================== interpretations by Pundits--> ......The deal "allows IBM to have valued-added technology," said Amir Ahari, analyst at IDC Corp, a key point in as average selling prices of PC edge lower. Moreover, access to IBM's technology labs allows Dell "to wean themseleves from the Microsoft (MSFT) and Intel (INTC) camp" to offer their customers high-end technology. Dell's Research & Development budget represents some 1.5 percent of of its total revenue. "Millions vs. IBM's billions," he Ahari said. New OEM business The companies said they believed the deal to be the largest information technology OEM (original equipment manufacturer) pact ever struck. The deal is non-exclusive, they said. The two PC giants have an existing OEM relationship, but an IBM executive told industry analysts at a press conference in New York that the deal is new business, albeit incremental. As a rear-loaded deal, IBM will see the bulk of the business by the seventh year. The company would not say how much of that business would be realized in the first year. Doing a back-of-the-envelope calculation, this would mean an average of some $2 billion a year in business, or 33 percent of IBM's current business $6.6 billion OEM business. Dell will ramp up its purchases from IBM "five to tenfold" over the life of the aggreement, Mike Lambert, senior vice president in the Enterprise Group, told CBS.MarketWatch.com. IBM does not breakout its OEM business partners, but given the five to tenfold increase, it appears Dell accounts for some 5 percent of IBM's current OEM business. Dell discount? "This is bringing together two good companies... Any collaboration is a win-win for both," said Joseph Hosler, an analyst at Independence Investment Associates in Boston. The question remains what type of price discounts does Dell get with the long-term purchasing aggreement. The pact isn't likely to change his perception of the two companies' strategies going forward, Hosler said, calling it an "enhancement of what they already have." Dell said pairing IBM and Dell's technology with Dell's direct selling model will "enhance Dell's competitiveness in the global computer industry." Chip components At first, the pact grants Dell access to IBM's high capacity disk drives, network adapter cards, flat panel displays and some custom chips, including high performance static random access memory (SRAM) chips. In the future, the deal calls for Dell to buy IBM's copper, silicon-on-insulator and "other advanced technologies," the companies said in a joint statement. "The body of Dell-developed product technology, particularly in servers, storage products and notebook PCs, is expanding rapidly," said Dell's Mike Lambert, senior vice president in the Enterprise Group. cbs.marketwatch.com.