12 February 2003 PC and server vendor Dell Computer has formally ended its close manufacturing and services ties with IBM, axing a $16 billion (€14.91bn) components contract and scaling down a $6 billion (€5.59bn) services deal with the systems giant.
The two contracts, which were due to run for seven years, were signed in 1999 at the height of the technology boom. But the manufacturing partnership, described by both companies as “the largest agreement of its kind in the information technology industry”, has fallen apart following IBM’s decision late last year to sell its hard disk business to Japanese electronics and engineering conglomerate Hitachi Ltd for $2.05 billion (€1.91bn).
Aside from storage products, Dell has been purchasing most of its microelectronics, networking and display technology from IBM for integration into its computer systems.
On the services side, where IBM Global Services is a flagship provider of support services to Dell customers, Dell has seen many organisations opt to trim their IT spend by selecting other, less expensive service providers. However, IBM will continue to offer services to Dell customers on request.
Analysts at investment bank Lehman Brothers estimate that the services agreement, including computer installation, maintenance and support, was worth $200 million (€186.4m) a year to IBM.
That kind of revenue stream is being quickly replaced by more strategic business. In the latest in a series of outsourcing mega deals, IBM will today announce it has agreed a $2 billion (€1.86bn) contract with automotive component manufacturer Visteon. That follows similar contracts with JP Morgan for $5 billion (€4.66bn) and Deutsche Bank for €2.5 billion.