IBM and Dell sign $16bn megadeal

IBM and Dell have announced a massive OEM (original equipment manufacturer) contract worth $16bn.

Under the deal, IBM will supply components such as high-capacity disk drives, network adapter cards, flat-panel displays, high-performance memory and custom chips to be integrated into Dell hardware.

Martin Brampton, senior analyst at Bloor Research, hailed the deal as a very significant one. "IBM and Dell together is a powerful combination that is bound to shake up the industry. It is definitely a setback for Compaq. I think the competition will be the toughest in the server market, because this has the best potential for profits," he said.

Brampton said a megamerger between the firms is possible, but said it would go against the current trend. "The big vendors found they weren't actually getting much value out of these costly mergers. IBM is not going to buy a company now unless it can see a significant return on investment," he said.