ARMONK, N.Y. -- IBM announced yesterday that it would supply mainframe computer and microchip technology to Hitachi Ltd., a longtime rival in the market for large computers.
With profits shrinking fast in the mainframe business, the landmark deal is an acknowledgment by both companies that they must cooperate to reduce costs.
"Changing times make strange bedfellows," said John Staedke, president of Hitachi Data Systems in Santa Clara, Calif., the U.S. computer-making subsidiary of the Japanese corporation.
For IBM, the deal is also an important endorsement of its technology and represents a shift in strategy. Under Louis V. Gerstner Jr., who took over as chairman a little more than a year ago, IBM is pushing hard to reap the benefits of its technology by increased licensing and original-equipment sales.
"This agreement with Hitachi shows that we're moving forward quickly to leverage our technology through licensing and original equipment sales," said John M. Thompson, a senior vice president.
Hitachi and Fujitsu Ltd. are the largest producers of mainframe computers compatible with those made by IBM, meaning they can run the same data base, accounting and other software programs as IBM machines.
The price wars and quick product cycles found in the personal computer industry have spilled over into the market for large computers. Mainframe prices have been cut 20 percent or more annually for the last few years. Today, new generations of products come out every two years or so, about twice as fast as before.
Facing slimmer profit margins and high development costs, Hitachi has chosen to buy, rather than create, the core technology for future generations of mainframes. "The basic engines for Hitachi's machines in the future will be from IBM," said Bob Djurdjevic of Annex Research in Phoenix. "Hitachi becomes a value-added distributor for IBM."
Under the agreement, IBM will supply Hitachi with new generations of its chips for use in mainframe computers, called CMOS (for Complementary Metal Oxide Semiconductors) microprocessors. The chips benefit from the same low-cost, low-energy-consumption technology that has driven down prices and lifted performance of personal computers.
The pact with Hitachi underscores how much relations between the two companies have healed since 1982, when Hitachi was caught trying to steal IBM technology secrets.