Siemens AG and IBM have signed a 7.1 billion euro ($9.6 billion) deal to upgrade the German army's non-military computers and phones. They have established a joint company, BWI Informationstechnik GmbH, of which they will collectively own 50.1% with the remainder owned by the German government. Siemens will hold 60% of the two companies' joint share, making this the biggest contract in Siemens' history. The modernization project, dubbed "Herkules," is expected to take ten years, and is the largest "public-private" partnership in Europe. Siemens will be responsible for modernizing the army's personal computers, servers, and phones, while IBM will update the army's data centers. IBM will also build a "public key" infrastructure to enable electronic documents to comply with signature and encryption regulations. Siemens shares gained 1% on the news. The deal is good news for Siemens' IT unit, SBS, which has been cutting thousands of jobs in an increasingly competitive environment. Siemens has been embroiled in a bribery scandal that has put other joint ventures on hold, including a telecom venture with Nokia.
• Sources: Bloomberg, Reuters,Business Week
• Related commentary: Siemens-IBM in $9B German Military Deal (NYSE:AP), Nokia-Siemens Telecom JV Delayed, But Not Dead, More Consolidation in Telecom Equipment As Nokia and Siemens Announce $31.6 Billion Deal
• Potentially impacted stocks and ETFs: Siemens AG (SI), International Business Machines Corp. (NYSE:IBM). Competitors: Alcatel-Lucent (NYSE:ALG), Hewlett-Packard Co. (NYSE:HPQ), Electronic Data Systems Corp. (NASDAQ:EDS). ETFs: Internet Architecture HOLDRs (NYSE:IAH), iShares S&P Global Technology (NYSEARCA:IXN), iShares Russell 1000 Growth Index (NYSEARCA:IWF), iShares Russell 3000 Growth Index (IWZ)
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