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THE SUM OF ITS PARTS IS ADDING UP

Look under the plastic of an Apple Powerbook, and you'll find IBM (IBM)inside. From the PowerPC G3 microprocessor to the hard-disk drive to specialty chips, Apple Computer Inc. uses Big Blue components for the guts of its hot-selling portables. Even the nifty screen on some Powerbooks is from a joint venture of IBM and Toshiba Corp.

Apple (AAPL)is just part of what's driving the IBM component business. Cisco Systems(CSCO), Hewlett-Packard(HWP), and Sun Microsystems (SUNW)all purchase custom chips from IBM, whose semiconductor division is now pushing $3 billion in annual sales--up from zero in 1992. Disk drives are another bonanza. Four years ago, IBM trailed such specialists as Seagate Technology(SEG), Quantum(QNTM), and Conner Peripherals in drives for PCs and workstations. Now, IBM is No. 1 in revenues from such drives, with 23.9% of the worldwide market, according to Disk/Trend Inc. in Mountain View, Calif. Customers include Sun and Compaq Computer(CPQ). All told, sales of key components have been growing about 44% a year, IBM says, and should top $6 billion in 1998. Half in jest, managers even mocked up a logo: IBM Inside.

By Neil Gross in New York


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