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Update 2: Big Blue to team up with Dell

Technology partnership to last seven years, worth $16 billion

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Dell and IBM have signed a $16 billion, seven year technology cross-licencing, deal which will see the direct seller using Big Blue products to bolster its high-end weakspots. It is thought to be the largest deal of its kind in the IT industry. Details of the deal came through at 3pm GMT (10am EST) after news about the tie-up began to leak earlier today. The BBC Web site's news service was one of the first sites to carry the news. Dell will use IBM high-capacity disk drives, network cards, flat panel screens, and SRam. It is also thought that the deal will extend to microelectronics, such as IBM's copper chip initiative - a move which could put Dell at odds with long-time partner Intel. Brian McBride, vice president Dell UK & Ireland, said: "Our rivals will find it hard to compete, if we're spending $16 billion with IBM you can imagine we're getting keen prices. I think Compaq will be quite worried - we're the nimblest player in the market." He stressed that any development involving IBM copper chip technology would not jeopardise Dell's relationship with Intel. "This is a future technology, we're keeping our options open. I don't think you'll be seeing Dell PCs based on anything other than Intel." Dell has enjoyed runaway success in the PC and low-end PC server markets but has a lot of ground to make up before major corporate customers will consider using it at the high end. This tie-up with IBM will, Dell hopes, plug those gaps. James Vanderslice, senior vice president and group executive of the recently formed IBM Technology Group, described the deal as: "Further evidence of our commitment to bringing IBM-developed technology to market quickly through a variety of channels and to a wide range of customers." It has been a long time since IBM was a big noise in the PC market and the company is focussing on software, services and high-end product technology as its best hope for sustained future growth. Both were caught short by last year's Compaq/Digital merger. Dell lost one of its key service partners and IBM found itself with an unexpected rival in the high-end arena. ®

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