"IBM will be getting an instant hit" says Kadlec, "since it is the one that will be getting paid" from the sale of the equipment. For Dell the arrangement is a bet. "It is banking on long-term benefits from codevelopment," says Kadlec. In particular, Dell is hoping that the joint endeavor will create new markets. "The company had gotten used to a 50 percent growth rate," says Kadlec. "It is now looking for a way to keep up its growth in the face of a slack in computer sales." Initial reaction on Wall Street was favorable.
The competitive pressures of reducing costs and maintaining demand have yielded a new hookup in the computer industry. On Thursday, hotshot Dell and lumbering giant IBM announced a seven-year deal under which Dell will purchase $16 billion worth of equipment from IBM, including disk drives, flat-panel displays and memory chips. The arrangement also calls for the two companies to collaborate in the development of new technology. The agreement seems like a good deal for both companies, says TIME Wall Street columnist Daniel Kadlec, "but in the short run it looks like better news for IBM."