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Dell, Samsung sign $16 billion pact

The Korean manufacturing giant says it will provide Dell with memory components, LCDs, monitors and optical disk drives.

Dell Computer and Samsung Electronics on Wednesday linked arms in a $16 billion partnership involving component supply and research and development.

Under the terms of the new agreement, Samsung said it will provide Dell with memory components, liquid-crystal displays (LCDs), monitors and optical disk drives for its line of computer products.

Analysts say this latest supplier agreement bodes well for both parties and ensures that Dell gets consistent access to high-quality parts, reasonable prices and preferential treatment.

"One of Dell's greatest strengths has not been in its direct model, but in its supply chain," said Meta analyst Steve Kleynhans. "It has the best, tightest supply chain that runs like clockwork. You have to have good, constant relationships with suppliers" to ensure this happens, he said.

Though this type of supplier agreement is anything but new, many companies are placing more emphasis on signing long-term contracts as an effort to keep prices contained and ensure adequate supply, especially during leaner times.

Analysts also say that an attractive part of the agreement for Dell is that it includes the supply of LCD panels, which are becoming an increasingly popular feature.

"Anything Dell can do to increase value of sales can mean more profit," said Gartner analyst Martin Reynolds. "Bringing LCDs in the mix can push desktop prices higher again."

"This agreement is a big win for both," Reynolds added. "This is the right kind of relationship to have."

Round Rock, Texas-based Dell, which has partnered with Samsung in the past, said the agreement also calls for joint research and development efforts focused on providing Dell?s customers with computer products at competitive prices.

Last October, Dell expanded its relationship with South Korea's Samsung to ensure a long-term supply of LCD panels used in notebook computers and flat-panel monitors.