Western Digital, IBM Will Share Technologies
Western Digital said Wednesday that it has signed a cross-license patent agreement with International Business Machines Corp. that will give the Irvine computer products company access to a broad range of IBM technology.
Under the agreement, Western Digital will pay undisclosed royalties to IBM for the right to use IBM technology for five years in products such as computer chips, disk and video controllers and computer circuit boards. Western Digital will be licensing its technology to IBM as well.
“We are pleased to have reached this agreement with IBM because it further strengthens our relationship with this important industry leader,” said Roger W. Johnson, chairman, president and chief executive of Western Digital. “The agreement gives us access to IBM’s extensive patent portfolio and includes patents covering leading process and product technologies in the semiconductor and computer industries.”
Financial terms for the deal were not disclosed.
Western Digital stock closed Wednesday at $12.375 a share, up 37.5 cents, in American Stock Exchange trading, continuing the stock’s recent bull run on Wall Street.
IBM, which is based in White Plains, N.Y., has a reputation for tough enforcement of its patent rights, but it has been aggressively pursuing licensing agreements with suppliers since the summer of 1987. Robert Blair, a Western Digital spokesman, said the agreement was not reached under threat of litigation. He added that payments to IBM will not have a material impact on his company’s earnings.
Wall Street analysts welcomed the agreement, saying that a cooperative relationship between IBM and Western Digital bodes well for both companies.
“This kind of agreement is becoming typical in the industry,” said analyst Steve Ossad with Montgomery Securities in San Francisco, “and it’s consistent with an improved business relationship.”
Raj Rajaratnam, analyst with Needham & Co. in New York, said that the agreement signals a close working relationship between IBM and Western Digital that could enhance Western Digital’s prowess in the technology marketplace.
He also said the license agreement reinforces the rumor circulating on Wall Street that IBM has granted Western Digital a major contract to supply parts for a notebook-size laptop computer that IBM is expected to announce that it will make. Both Western Digital and IBM have declined to comment on the rumor.
However, Mark Matheson, an analyst with Cruttenden & Co. in Newport Beach, cautioned that the license agreement by itself is not an indication that Western Digital has won the contract to supply parts for the IBM laptop or that that contract would be lucrative.
Rajaratnam said Western Digital’s strategy for becoming a broad supplier of parts and systems for personal-computer makers is coming together. He said the company has strong product lines in its “intelligent” disk drives, storage controllers and communications offerings.
Western Digital will report its earnings for the third quarter on April 20, Blair said.
