NEC AND MICROSOFT TO GET TOGETHER ON COMPUTER SYSTEMS.

(Reuters) - NEC Corp, one of Japan's largest computer makers, and U.S. software giant Microsoft Corp said on Tuesday they would join to develop high-end computer server systems and services for businesses.

The alliance aimed to take advantage of increasing corporate reliance on networks and the Internet to conduct business, they said.

"Demand for reliable high-end servers is going to have the potential to be a high-growth market," Microsoft founder and chairman Bill Gates told a news conference in Tokyo.

He said the deal would take advantage of "the unique capabilities that NEC has with servers and its existing customer base."

NEC and Microsoft would provide hardware and software to handle the flow of information through servers and the storage of information in data centres, the two companies said.

The alliance was not extended to a capital tie-up and no specific sales targets were set.

NEC and two affiliates would set up service and support centres with a combined 300 employees to develop and build systems using Microsoft's Windows 2000 and Windows/.NET server software.

Microsoft already has cooperative arrangements with two other major Japanese computer and electronics conglomerates, Hitachi Ltd and Fujitsu Ltd

Chip-making divisions at the three conglomerates have been hit hard by this year's information-technology slump and the global economic slowdown.

The three recently unveiled restructuring plans included hefty job cuts and a stepped-up shift of resources toward Japan's growing market for computer software and services.

"There is increasing uncertainty over the economic environment, but as the electronics industry restructures... We can position ourselves for a recovery," said NEC President Koji Nishigaki.

Nishigaki said the deal, aimed strictly at a corporate customer base, would concentrate on three areas: development of Internet, application and data centre servers; software customisation and support; and Windows/.NET Internet hosting.

Microsoft's previous computer deals in Japan include an agreement in September 2000 with Fujitsu to set up a new centre for maintenance services and systems integration for business clients using Microsoft's Windows operating system.

Similarly, in June last year, Hitachi agreed to form a core set of Windows 2000-based systems for corporate customers.

Shares in NEC ended Tuesday 2.39 percent higher at 1,159 yen ($9.60), modestly outperforming a 1.77 percent rise in the benchmark Nikkei 225 average

The shares rose as high as 1,230 yen, up more than 8.6 percent and their highest in more than a month, after the companies said during afternoon trade they were set to announce a strategic alliance.