Dell vows to keep up competition with IBM despite $16b parts deal

Do not look for an IBM Corp. mainframe or AS/400 minicomputer with Dell Computer
Corp.’s name slapped on it as a result of the seven-year technology agreement between
the two companies announced this month.

Dell chairman Michael Dell said in Washington last week that although his
company’s agreement with IBM “gives us broad, full access to a big candy store
of technology,” Dell will continue to develop its own servers and compete vigorously
with IBM. He said he even expects Dell’s PC and server market share to continue to
grow in part at IBM’s expense.

Under the agreement, Dell will buy $16 billion worth of computer parts manufactured by
IBM to incorporate into Dell systems. Neither company, Dell said, plans to sell the
other’s computers under its own name. IBM makes disk drives, flat-panel displays,
microprocessors, memory chips and network interface cards.

Michael Dell said the agreement with IBM was not to counter rival Compaq Computer
Corp.’s acquisition of Digital Equipment Corp., which gave Compaq expanded access to
enterprise computing and services.

He cited his company’s 80 percent growth in server sales last year and its
impending introduction of eight-processor Intel Pentium III Xeon servers as evidence that
Dell can compete in the enterprise market. He said access to IBM’s technical prowess
would give Dell better tools to build competitive enterprise products.

Dell also predicted that the Linux operating system, with its free source code, would
continue to lure users away from Unix rather than from Microsoft Windows NT. This month
Dell will begin selling servers bundled with Linux from Red Hat Software Inc. of Research
Triangle Park, N.C.

“Clearly people are using Linux where they would have used NT. But I don’t
think it will gain a substantial share of the market,” Dell said.  

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