IBM To Sell Networking Equipment To Chinese Company



Huawei Technologies Co. Ltd., one of China's largest telecommunications equipment makers, is purchasing networking equipment from IBM to develop China's Internet infrastructure and to upgrade its telecommunications systems.

During the next five years, IBM (stock: IBM) will supply a variety of chips and components to Huawei, including network processors, packet-routing switch chips, and customized application-specific integrated circuit chips. These chips and components are designed to process data traveling across the Internet.

The monetary value of the agreement has not been disclosed, but IBM executives have said that Huawei is the company's largest customer in China, and IBM expects to begin seeing an increase in revenue by the second half of next year. To secure the supplier relationship with Huawei, IBM has established in China a development center that's staffed with up to 10 engineers who provide technical support for the hardware and software IBM has installed. IBM says it will increase the engineering staff as its partnership with Huawei continues.

Providing Internet infrastructure components to China presents a huge market opportunity for IBM, says Steve Longoria, an IBM marketing director. China's Internet system is in its infancy, and its telecommunication system has lagged behind Western systems, he says.

Because of the competition that IBM stands to face from Chinese desktop manufacturers, selling networking equipment is a pretty smart move on its part, says Bob Sutcherland, an analyst with Technology Business Research. "If they're [IBM] not selling their computers, they might as well get their components in there."

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