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Intel, Network Appliance ink $1 billion deal

The two companies have signed a seven-year cross-purchasing agreement for storage devices and chips.

Intel and Network Appliance have signed a seven-year, $1 billion cross-purchasing agreement, the companies said Friday.

Under the deal, Santa Clara, Calif.-based Intel will purchase Network Appliance's storage devices for use in its data center operations, and Sunnyvale, Calif.-based Network Appliance will purchase Intel chips and other components.

The agreement also includes patent sharing, technology development, and joint standards collaboration, according to the companies.

The deal expands on a relationship forged between the companies in 1992. Financial terms were not disclosed.

Analysts say Network Appliance stands to gain more from the relationship than Intel.

"For Intel, it doesn't seem like a major deal. Their data centers are just a small, small part of their business and a pretty unsuccessful part of their business," said Jeremy Lopez, a semiconductor analyst at Morningstar.

Shebly Seyrafi, a storage analyst with A.G. Edwards, doesn't see the deal as a huge bonus for Network Appliance, either.

"I don't think it's going to be a very significant growth driver for Network Appliance per se. I just think it's a nice relationship with the leader in the semiconductor industry," Seyrafi said.

Storage companies have suffered recently, highlighted Thursday when Sun Microsystems warned it will miss estimates in the current quarter by a significant margin.

A day earlier, Brocade Communications, which makes switches for storage area networks, cut its earnings and sales outlook for 2001.

Both companies cited the U.S. economic slowdown.