IBM, EMC shake hands on $US3 billion OEM deal

On the heels of its $US16 billion landmark deal with Dell Computer, IBM's OEM (original equipment manufacturer) business got another boost Wednesday as Big Blue signed a $3 billion deal to supply fast-rising EMC Software with its advanced disk storage products.

Under the terms of the five-year deal, EMC, based in Hopkinton, Massachusetts, will buy IBM's products for inclusion in its Symmetrix Enterprise Storage systems. As part of the deal EMC has the right to purchase other IBM products besides disk drives, including microprocessors and a variety of custom chips.

The new alliance also includes a broad patent cross-license between the two companies' storage products and a range of other technologies, officials said.

EMC officials said what helped drive the deal from their perspective is that IBM is one of only a few companies that has made the commitment to aggressively grow its OEM business and invest heavily enough to keep its component technology state of the art.

IBM officials also appear happy with the agreement, if only because one of its fastest growing competitors is now a partner.

"Today one of IBM's fiercest rivals in the storage business is now one of our best customers for advanced technology," said Jim Vanderslice, IBM's senior vice president and group executive, in a prepared statement.

Top IBM officials have reiterated over the past year that the three most important growth areas for the company are software, services, and its collection of OEM technologies, which is why it formed the IBM Technology Group last fall. The new group generated over $6 billion in revenues last year and is expected to grow that figure by up to 40 percent this year. And earlier this month, IBM inked a lucrative OEM deal with Dell.