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IBM, Telefonica form pact
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March 25, 1999: 1:17 p.m. ET
Future growth seen as key to lucrative deal in Spanish, Latin American markets
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NEW YORK (CNNfn) - IBM Corp. entered into an agreement with Telefonica de Espana Thursday that some believe will provide the world's largest computer maker with a billion-dollar revenue stream for years to come.
The deal, announced during a Madrid press conference early Thursday, calls for IBM and Telefonica, the top telecommunications provider in Spain and Latin America, to jointly develop and deliver digital-media and information-technology (IT) applications in those markets.
Terms of the deal were not disclosed and company officials declined to comment. But analysts said the agreement was likely worth several billion dollars to both firms.
"That's important because IBM has total revenues of $82 billion," said John Bartlett, portfolio manager for the St. Louis-based Commerce Growth and Income fund, which holds IBM shares. "It further reinforces the strategy of IBM to move more toward [being] a service provider as opposed to a hardware provider.
Combining Telefonica's vast Internet Protocol network and knowledge of Spanish and South American markets with IBM's global presence and expertise in IT creates a potent formula for growth, analysts said.
Initially, much of the product development and delivery will be concentrated in the Spanish market, but there are plans for future expansion in Latin America, an IBM spokesman said.
News of the deal sent IBM's stock up 2 1/ 2 to 172 in early afternoon trading on the New York Stock Exchange. Telefonica shares likewise received a boost from traders, rising 3 1/ 2 to 133.
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IBM Corp.
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