EMC cancels $3 billion deal with IBM

EMC has canceled its commitment to buy $3 billion worth of disk drives over five years from IBM, as part of a settlement between the two companies.

In March 1999, the companies reached a $3-billion deal whereby EMC would continue to buy IBM disk drives to use in EMC Symmetrix products. The deal also included patent cross-licensing between the companies.

However, the deal fell through as part of last week's patent infringement settlement (see yesterday's story). IBM and EMC, in a joint statement, said all claims and counterclaims pertaining to a patent dispute were dismissed. Both parties extended their patent cross-licensing agreement and pledged to follow a five-year moratorium on patent infringement lawsuits.

The disk-drive agreement has been replaced by a standard contract without a specific monetary value, said Mark Fredrickson, an EMC spokesman. The original deal became obsolete because of IBM's difficulty meeting quality requirements and deadlines for its high-end disk drives, Fredrickson said. As a result, the financial target became "unrealistic," he added.

IBM spokeswoman Carol Makovich confirmed there had been some delays in delivery but said they were being addressed. She added that the $3-billion figure was a value that EMC estimated, and the monetary value of any future deals will be decided by EMC.

EMC Symmetrix 8000, the company's new enterprise storage system, now features Seagate Technology's disk drives.

Steve Duplessie, an analyst at the Enterprise Storage Group, said Seagate looks well poised to capture some disk-drive business as IBM overcomes delays. "This market doesn't forgive you much if you're late," Duplessie said.

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