Analysts are saying that a US$5 billion deal announced between Dell Computer Corp. and Amsterdam-based Koninklijke Philips Electronics NV will be good for the U.S. computer maker.
The five-year pact could be worth up to $5 billion for Philips, according to a company statement. The price tag depends on a 25 percent annual growth rate.
The components supplier said it will provide Dell with CRT and flat-panel monitors, storage devices, connectivity solutions and other components that will be used in Dell computers.
The deal is slated to go into effect almost immediately, said Philips spokesman Jeremy Cohen. It represents a large jump over Philip's current relationship with Dell, which netted $600 million in revenue for 2001, Cohen said. Most of that business was in computer monitors.
In addition, Dell will become "a preferred worldwide supplier to Philips of industry-standard server and data-storage products, workstations and personal computers."
Dell will also market and sell a range of Philips-brand peripherals, such as CRT monitors and LCD projectors, Dell spokesman Venancio Figueroa said today. Figueroa said Dell is already selling many of those peripherals and that this new deal simply extends an older arrangement.
Analysts said that the news is good for Dell.
"It's always positive when vendors strengthen their relationships with suppliers," said David Bailey, an analyst at New York-based Gerard Klauer Mattison Advisors Inc.
That sentiment was shared by New York-based Argus Research Co. analyst Wendy Abramowitz. She said it is good for vendors to have several different suppliers to rely on for key components.
Bailey said that an important part of the deal from Dell's perspective is that it gives the computer maker access to flat-panel displays. Prices for flat-panel displays have begun to rise lately. According to reports by the IDG News Service, the cost of a 15-in. flat-panel display has gone up about $60 in recent months and will likely rise by another 10 percent. Component price increases recently moved Apple Computer Inc. to add $100 to the price of its new flat-panel iMac.
