smart card loyalty systems, said they are entering into a strategic partnership.

The companies plan to work together to develop smart card-based systems for educational institutions, the hospitality industry, and on-line shopping, among other uses.

The contractual arrangements are expected to include reciprocal licensing, joint branding and marketing strategies, and revenue sharing. IBM also would have a chance to obtain an equity stake in IC One, a Salt Lake City company that began operating its first program, called Kids Card, in 1997.

In announcing their relationship last week, IBM and IC One said further details remain to be negotiated.

The powerful combination of IC One's loyalty patent and IBM's open smart card architecture will provide plug-and-play compatibility and firmly establish our companies as the smart card industry leaders,'' said Skip Bennett, president and chief executive officer of IC One.

Mr. Bennett worked at IBM for 22 years before moving to his current post in May. His last job at IBM was in its management consulting group, which worked with IC One for two years. IBM supplied the back-end management system powered by a DB2 data base.

IBM was among several companies that participated in the Kids Card launching, along with the terminal supplier Intellect Electronics, smart card maker Gemplus, and the card personalizer ID Card Services. Children's Miracle Network was a fund-raising participant.

Kids Card is up and running in two counties in Utah. Cardholders can load value on to a chip card and shop at participating merchants, which agree to donate a percentage of each sale to the school named on the card.

IC One claims its Kids Card program is the only smart card-based loyalty system for educational funding in the United States, and it realizes it will take time before a program like this gains nationwide acceptance, Mr. Bennett said.

It's an application that may be before its time because in smart card technology, one application is not going to drive infrastructure, he said. But we have learned a lot.

In the meantime, IC One is turning its attention to the virtual world. Last month it merged with Los Angeles-based Schimatic Technologies Inc., a developer of on-line shopping services and kiosks.

Schimatic has developed a system based on virtual reality, in which shoppers use a computer mouse to pick up items in an on-line store and look at them before making a purchase. The technology can also be used to explore hotel rooms or rental properties on-line.

Mr. Bennett said IC One also targeted the hotel and rental markets as likely early adopters of smart card technology. IC One has developed set-top boxes with smart card slots that could let hotel guests pay their room bills without having to communicate with a clerk.

IC One's strategic plan is to enter into alliances with companies that can benefit from loyalty applications. The manufacturing would be outsourced to IBM.

David Asay, senior executive of IBM's pervasive computing division, said, The possibilities are endless. We are looking forward to a long and mutually beneficial partnership with IC One.

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