June 14, 2005, By Reuters

IBM spokesman John Buscemi confirmed that IBM stood to receive roughly $730 million over seven years. Earlier on Monday, Affiliated Computer said in a regulatory filing that its seven-year contract with Disney was worth $610 million.

Neither company would say how many jobs would be affected, but sources said that Disney planned to transfer one-third of its computer services employees, or 1,000 of Disney's 3,000-strong technology staff, to outside contractors.

The outsourcing move capped an 18-month technology review by the entertainment conglomerate, according to Disney spokeswoman Michelle Bergman.

"This transition will take place over the course of the next two months, and impacted employees will be afforded the opportunity to be transferred to these suppliers," Disney said in a written statement referring to suppliers IBM and ACS.

Buscemi said IBM would manage the company's mainframe and midrange computers, as well as common software applications, such as Disney's SAP business planning system and older software used to run operations at Disney theme parks.

The contract with IBM of Armonk, N.Y., covers the maintenance of roughly 3,700 Unix and Intel-based midrange computer servers, Buscemi said.

It also includes the vast computer storage systems Disney uses to archive corporate data, which represents 1.4 petabytes of information. A petabyte represents 1 quadrillion bytes, or nearly 30 million four-drawer filing cabinets full of text documents.

IBM will manage some of the Disney operations with on-site employees and workers from a technical service center in Tulsa, Okla., Buscemi said.

Affiliated Computer of Dallas said in a federal filing that it will provide technology services for Disney's global data network and support for Disney's U.S. offices such as desktop PC and help desk support, computer security and procurement.

Chris Montano, an analyst with Wells Fargo Securities in San Francisco, said the $610 million deal was a significant win for Affiliated, which typically counts on far smaller deals.

"This represents a substantial deal for a firm (ACS) whose typical deals are valued at less than $100 million," wrote Montano in a note to clients. He rates ACS stock a "buy."