FOR IMMEDIATE RELEASE                                         AT
THURSDAY, DECEMBER 18, 1998                                  (202) 514-2008
                                                         TDD (202) 514-1888








JUSTICE DEPARTMENT MOVES TO END

EXCLUSIVE AGREEMENT BETWEEN IBM AND STORAGETEK

IN MAINFRAME COMPUTER DISK STORAGE SUBSYSTEM PRODUCTS







Agreement Had Ended Competition Between IBM and StorageTek







	WASHINGTON, D.C. -- International Business Machines
Corporation and Storage Technology Corporation will modify a 1996
marketing agreement that established IBM as the exclusive
distributor for StorageTek's mainframe disk storage products,
under a settlement reached today with the Justice Department.

 

	The 1996 agreement ended competition between the two
companies in the multi-billion dollar market for mainframe
computer disk storage subsystems, which store and provide ultra
fast access to data.




	The Department's Antitrust Division today filed a lawsuit,
together with a proposed settlement, in U.S. District Court in
Washington, D.C.  The settlement, if approved by the court, will
resolve the Department's allegations.




	In its lawsuit, the Justice Department alleged that before
the 1996 agreement went into effect, competition between IBM and
StorageTek had greatly benefitted mainframe disk storage
purchasers.  Price declines in the industry eased after
StorageTek and IBM stopped competing against each other.




	"High-technology products like these work behind the scenes
to help major institutions, both governmental and corporate,
operate more efficiently," said Joel I. Klein, Assistant Attorney
General in charge of the Justice Department's Antitrust Division. 
"Vigorous competition is what drives the significant technical
improvements and price reductions that we have seen in these
products in recent years, and we won't tolerate private
arrangements that slow such advances.  As a result of this case,
StorageTek will once again be able to compete vigorously in the
mainframe disk storage system market."	




	In its lawsuit, the Department specifically objected to
terms of the 1996 agreement that imposed substantial financial
penalties on StorageTek if it sold its mainframe disk storage
systems to anyone other than IBM.  The agreement also imposed
financial penalties on IBM if it did not buy enough disk storage
subsystem products from StorageTek.  These and other
anticompetitive terms effectively eliminated StorageTek as an
independent competitor in the mainframe disk storage system
market.




	IBM and StorageTek had been two of only four major
independent competitors worldwide in the development, production,
and marketing of mainframe disk storage subsystems.




	Under the proposed settlement, IBM and StorageTek will be
prohibited from maintaining contract provisions that would
financially penalize StorageTek for marketing mainframe disk
storage subsystems to customers other than IBM.  The proposed
settlement would also ban provisions that would otherwise prevent
competition between IBM and StorageTek in the marketing of
mainframe disk storage subsystems. 




	In addition to providing positive incentives for StorageTek
to re-establish its competitive independence, the proposed
settlement limits after 1998, the amount of mainframe disk
storage subsystems that StorageTek may sell through IBM, until
StorageTek has begun making substantial sales to customers other
than IBM.




	IBM, headquartered in Armonk, New York, is the world's
largest computer manufacturer; it had worldwide revenues of about
$75 billion in 1996.




	StorageTek, based in Louisville, Colorado, is a major
producer of disk and tape storage systems for mainframe
computers, and had total worldwide revenues of about $2 billion
in 1996.  In 1995, the last full year in which they were
mainframe disk storage subsystem competitors, IBM and StorageTek
had total mainframe disk storage subsystem sales of about $2
billion and $300 million, respectively.




	As required by the Tunney Act, terms of the proposed
settlement will be published in the Federal Register, together
with the Department's competitive impact statement.  Any person
may submit written comments concerning the proposed settlement
during a 60-day comment period to John F. Greaney, Chief,
Computers & Finance Section, United States Department of Justice,
Antitrust Division, 600 E Street, N.W., Suite 9500, Washington,
D.C., 20530 (202/307-6200).  At the conclusion of the 60-day
comment period, the Court may approve the settlement upon finding
that it serves the public interest.

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