IBM Unveils New Unit, Buys Consultancy

In an attempt to sidestep the slowdown in the IT services sector and
revitalize its struggling chip business, IBM Corp. on
Monday unveiled a new business unit — IBM Engineering & Technology
Services.

Big Blue said the new business group, which has been operating in stealth
mode since June, would target electronics companies looking for help in
design and production management of advanced electronics for their products.

The Armonk, New York-based technology giant has shifted more than 700
engineers to the new business and general manager Pat Toole expects the
staff to increase to more than 1,000 by next year.

The launch of the new unit comes as research firm IDC is lowering the 2002 worldwide IT services
growth rate to 6.7 percent, a reduction of almost 4 percent the earlier
forecast growth rate of 10.6 percent for the year.

IDC said the bleak outlook for the sector also caused a revision of its
5-year-forecast, noting that the 2002 discrepancy is the result of “two
market assumptions built into our forecast that did not hold true.”

Even as Big Blue is anticipating spending on enterprise to help push the new
business unit, IDC found that spending on many IT services actually declined
during 2002. “Second, the anticipated pick-up in demand by the middle of
2002 is now not expected until the last quarter of 2002, and a full recovery
is not expected until the spring of 2003,” IDC said, in explaining its
revised forecast.

“From an IT services perspective, project-oriented IT services markets such
as systems integration, IT consulting, and custom application development
suffered more severely than anticipated, and in aggregate, their 2002 growth
rates were revised downward nearly 5 percentage points,” it said.

IBM’s new unit, which will be based in nearby Somers, New York, will offer
services in four basic categories. It will hawk business process
optimization such as intellectual asset management; electronic design
(verification), web hosting and enablement; technology migration (consulting
or training for SOI technology) and manufacturing consulting.


It will also sell chip-focused services like silicon optimization, circuits,
arrays; frequency and power tradeoffs; yield analysis and chip/module/board
optimization.

IBM said the Engineering & Technology Services would also sell services
targeting component and platform development; system level optimization and
hardware/software integration.

It would also outsource technology for chip fabrication and offer full
product development outsourcing for semiconductor and system solutions.


“Our value proposition can be summed up in a single word — access,” general
manager Toole said. “We’re taking a skills-on-demand approach…We also will
be a portal into other parts of IBM, such as financing, research and
development and consultants who innovate, integrate and accelerate
time-to-market.”

Toole said the new unit would target a variety of industry segments,
including IT, communications, defense, aerospace, consumer electronics and
automotive.

IBM announced Medtronic, Inc., the New York Stock Exchange, Sony Computer
Entertainment, Consumer Direct Link, Inc. and Minolta as the first list of
big-name clients for the new business unit.

The launch of the new unit comes on same day Big Blue announced it would
take over EADS Matra Datavision, a consultancy group owned by European
aerospace group EADS.

Financial terms of the buyout were not disclosed. Big Blue plans to combine
the EADS Matra Datavision into its Product Lifecycle Management (PLM) group,
which helps design and engineer cars and aircraft.

IBM, which has identified the PLM business unit as a key segment of its
e-business strategy, said the acquisition would help tap into the lucrative
PLM services market. The PLM services market is expected to reach $5.5
billion in 2006, according the latest research from IDC.

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