Queries over IBM's $92M DEET deal

Queries over IBM's $92M DEET deal

Industry pundits are questioning the profitability of IBM's recent $92 million contract with the Department of Employment Education and Training Victoria (DEET), to supply up to 40,000 R30 ThinkPads and services.

According to sources close to the tender process, IBM won the three-year deal based on the price of its specs over Dell and previous DEET contract holder Acer Computer Australia.

Preoccupied with gaining market share and shifting inventory, IBM's narrow price skimming could put itself at risk of squeezing all profit margin out of the deal.

But Lynette Clunies-Ross, education industry manager for IBM Australia, asserts there are significant commercial gains in the deal for the vendor.

"IBM's in the business of making money for its shareholders. We went into this with our eyes wide open and we're very happy with the deal," she said.

IBM would not reveal the specifications of the newly released R30's range that it will supply to DEET Victoria starting in November. However, Clunies-Ross said DEET has settled on one set configuration for the 40,000 notebooks as opposed to a mixed bag of low and high-end specs.

According to the figures, the vendor will be selling the notebooks to Victorian teachers for a maximum price of $2300 each. Meanwhile, the going price of the R30, according to IBM's Web site, ranges between $2899 excluding tax for a Celeron 900MHz configuration, to $4299 for a PIII 1GHz model. All models include a three-year warranty term which will be catered by affiliated service agents in regionally located areas that IBM itself doesn't cover.

"IBM will not be involving business partners [or its GSA service arm] as such, but I certainly consider those agents to be partners in the delivery of those services," says Clunies-Ross.

The exact number of service agents remains confidential.

Exiting contract holder Acer this week congratulated IBM on winning the deal amidst fierce competition.

"They chose to purchase that business and that's not a direction Acer is interested in taking at the moment," said Darren Simmons, national sales director of Acer Computer Australia.

Acer's contract, which ended in June two years ahead of the original schedule, was reportedly valued at $67 million, but Acer extended that valuation to $98.75 million once the deal was completed.

Originally signed in 1998 to provide 33,000 notebooks to Victorian teachers, Acer ended up supplying more than 40,000 machines, Simmons said.

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