International Business Machines and Dell Computer, the world's second largest manufacturer of personal computers, yesterday forged a $16 billion (€14.78 billion) purchasing pact, believed to be the largest of its kind in the information technology industry.

Under the agreement IBM will supply Dell with a broad range of computer components over the next seven years. It represents a significant breakthrough for IBM , which began a broad effort to sell technology components to third parties in 1993 and formed a business unit to address the market last year.

Dell, founded by Mr Michael Dell, chairman and chief executive, will purchase storage, semiconductor, networking and display components from IBM for use in Dell systems. The agreement also includes broad patent cross-licensing between the companies and collaboration on the development of future technology.

Both companies are major employers in Ireland, with Dell employing about 4,000 people in Limerick and Bray - which it expects to rise to 6,000 - while IBM has 3,000 employees in Ireland and has a target of increasing this to 5,000 by the end of next year.

If the deal succeeds it would boost both companies operations here, as Dell's operations would benefit from higher sales in Europe, while IBM's Mulhuddart campus manufactures the disk storages and microelectronic products included in the deal.

Internationally, the agreement would enable Dell to tap into IBM's rich technology resources, said Mr Mike Lambert, Dell's senior vice-president. The patent cross-licensing element of the agreement will also clear the way for both companies to talk openly to one another about technology developments. The agreement may also give Dell preferential pricing and early access to new IBM technology, giving the PC manufacturer a competitive advantage, industry analysts said.

Dell ranks second only to Compaq Computer in the PC market, with 12.8 per cent market share. IBM said the agreement did not imply any change of strategy in its own personal computer business. Rather, it was a means for IBM to gain revenues from its substantial investments in the development of component technologies. Mr Lou Gerstner, IBM chairman and chief executive, has established the technology components business as one of three top priorities for IBM's growth, along with computer services and software.