IBM’s tie-up with Ford deals blow to EDS

Financial terms of the deal were not disclosed but IBM said Ford would purchase between 4,000 and 5,500 copies of IBM's software used by computer-based product designers.

IBM has also said it would provide lucrative consulting services and support as part of the multi-year deal. For every $1 of software sold, IBM typically reaps about $5 in consulting fees, said Ed Petrozelli, general manager of IBM's global product lifecycle management division.

Up until now, Ford had largely used software from a company called SDRC to design its vehicles. But after SDRC was acquired by EDS, whose former parent and biggest customer is General Motors Corp. rival Ford got the jitters, analysts said.

"Immediately Ford started getting a little anxious about EDS controlling its product design infrastructure," said Kevin Prouty, an analyst with AMR Research in Boston, adding that the deal with IBM amounted to a "big crack" in EDS' stronghold in the U.S. automotive industry.

"This is Ford saying we are not going to be an EDS shop. We are going to use IBM in a strategic way on par with EDS," Prouty added.

Ford spokesman Paul Wood said that the idea of using both EDS and IBM was to "become consistent with our brands around the world ... and from that drive synergies and reduce costs."

The news is another setback for EDS which is struggling to rebuild its image as a top computer services provider after a string of high-profile contract losses, a huge profit shortfall in the third quarter and a resulting U.S. government probe.

Under the terms of the deal Ford will license IBM's product design software, which is developed in conjunction with French software shop Dassault Systemes. The software, called Catia, will be used principally to design the body and exterior of Ford vehicles.

© Reuters