IBM wins Wal-Mart deal, edges out EMC

Siobhan Kennedy

NEW YORK: International Business Machines Corp., the world's largest computer

company, said on Monday it has displaced key competitors to win a high-profile

storage equipment deal with retail giant Wal-Mart Stores Inc.

The deal, which highlights the growing momentum for IBM's "Shark"

line of storage products, calls for IBM to supply 12 of its mainframe business

computers and 20 Shark devices to run Wal-Mart's industry-leading inventory and

supply system.

The new contract, worth an estimated tens of millions of dollars by analysts,

will supplant Wal-Mart's previous deals with IBM arch-rival EMC Corp., the

storage industry leader, Hitachi Data Systems and an older storage equipment

pact with IBM.

Wal-Mart - which last year had revenues of nearly $200 billion - has long

been considered the retail sector's model for using technology to manage

inventory and distribution. That way products in hot demand are quickly replaced

on store shelves, maximizing potential profits.

"Strategically, it's very, very important to us," Dave Carlucci,

general manager of IBM Americas, said in an interview with Reuters on Friday.

"It certainly makes this one of our biggest installations."

The senior IBM executive declined to say how the Wal-Mart deal compared in

size with other major retail customers that Big Blue serves, such as Saks Inc. ,

Gap Inc. and the No. 3 supermarkets group Ahold NV.

But this is the biggest deal IBM had ever won where it displaced existing

competitors on such a large scale, he said. Wal-Mart has installed a 50-terabyte

IBM system capable of storing five times as much data as is housed in U.S

Library of Congress.

"To get all of our storage in there, where we weren't positioned well,

and to get the next generation of our Z series (mainframe) with it, is very

positive," Carlucci said. Analysts said the deal was a sign that IBM's

storage line was now recovering ground it had previous lost to EMC.

"There's huge competition in the market today and IBM is fighting

back," John McArthur, an analyst with market research firm International

Data Corp. said. "For IBM to show this big of a deal is a huge comeback for

them."

Using IBM's mainframe computers and storage will enable Wal-Mart to order and

replace inventory across its 4,000 plus stores worldwide more efficiently than

before, Dan Phillips, Wal-Mart's vice president of technology, said.

"Something that may have run in two hours is now running in an hour and 15

minutes," Phillips said referring to a typical cycle of its restocking

process.

The deal is particularly significant given the depressed economic climate for

retailers, said Randy Covill, senior retail analyst with industry research firm

AMR Research. "It's all about cost-savings and operational

efficiencies," Covill said. "I think they're pushing that pretty hard

right now."

The announcement of one of its largest storage deals comes the day before IBM

is due to report its third quarter earnings on Tuesday. Winning new mainframe

and storage contracts helps drive demand for IBM's other big businesses,

including services and consulting work necessary to install its equipment.

(C) Reuters Limited 2001.