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IBM nabs Terra Lycos contract

Big Blue beats out Compaq and Sun to supply servers and software to Terra Lycos in a deal insiders say is worth between $70 million and $80 million.

IBM has beat out Compaq Computer and Sun Microsystems to supply servers and software to Terra Lycos in a deal insiders say is worth between $70 million and $80 million.

Big Blue has become Terra Lycos' "strategic technology partner," the sole company to provide servers, services and high-end software, IBM said in a statement.

The deal is a plum for IBM, which is struggling along with Sun, Compaq, Dell Computer and Hewlett-Packard to weather shrinking server sales. All these companies have been cutting prices, and consequently profit margins, amid the savagely competitive market.

Terra Lycos will buy IBM's xSeries Intel servers and its pSeries Unix servers, IBM said in a statement. It will also purchase software, including Tivoli, for managing hardware, and Websphere for e-commerce. The systems will be used to serve up Web pages--currently to about 99 million users per month--and for Terra Lycos' back-end accounting systems.

Under the deal, Terra Lycos also gets some influence over IBM's technology. The company will work with IBM researchers at Big Blue's Almaden, Calif., lab, and a Terra Lycos executive will join IBM's Advanced e-Business Council, a group of IBM customers that tries to spot new computing trends.

Terra Lycos, majority-owned by Spanish telecommunications company Telefonica, is a major Internet portal, but it still lags rivals such as Yahoo and AOL Time Warner.