business

France

Big Blue has taken a giant step toward making itself a centerpiece of Europe's high-tech future. In a tense bidding war against rival Hewlett-Packard Co., IBM wound up with the prize: a linkup with France's state-owned computer maker Groupe Bull. With this new partnership, IBM aims to assure that its high-speed RISC computer technology--not HP's--becomes a European standard. The alliance also bolsters IBM's strategy to become Europe's first line of defense against further Japanese inroads.

To win that honor, IBM had to fend off not only HP but the French government. While Bull Chairman Francis Lorentz and France's Finance Ministry favored a tieup with IBM, protection-minded Prime Minister Edith Cresson preferred HP as less threatening. It took President Fran cois Mitterrand to give IBM the final nod. The politically beleaguered Cresson was nonetheless quick to embrace the IBM accord as a big boost for her scheme to rescue France's flagging state-owned high-tech companies.

Although Cresson pledged to keep IBM from taking over Bull, the two will become closely intertwined. For starters, Big Blue will pay $100 million for a 5.7% slice of Bull's equity--a move designed to offset the 4.7% held by Japan's NEC Corp. IBM and Bull will share manufacturing of various RISC components that both companies will use in their computers. And IBM has agreed to resell about 150,000 portable computers annually from Bull's Zenith Data Systems unit and share the futuristic systems it is developing with Apple Computer Inc.

Pushed by Cresson, IBM will also help strengthen money-losing SGS-Thomson Microelectronics' position against its Japanese and U.S. rivals. IBM will transfer semiconductor-processing technology to the state-owned chipmaker, and it will double its current purchases of SGS chips to about $100 million annually.

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