Original Equipment Manufacturer - OEM

Filed Under:
Dictionary Says

Definition of 'Original Equipment Manufacturer - OEM'


1. The original definition: a company whose products are used as components in another company's product. The OEM will generally work closely with the company that sells the finished product (often called a "value-added reseller" or VAR) and customize the designs based on the VAR's needs.

2. The more recent definition: a company that buys a product and incorporates or re-brands it into a new product under its own name.

Investopedia Says

Investopedia explains 'Original Equipment Manufacturer - OEM'


There isn't a typo here; the two definitions do contradict each other. This term has become very confusing since it now can be used in both contexts. OEM sometimes means the company that sells the component to the the VAR, and other times it refers to the VAR who is acquiring a product from an OEM. The reason for this is that "OEM" (the abbreviation) is sometimes used as a verb instead of a noun. For example, a manufacturer might say that it is going to OEM a new product, meaning it is going to produce a new product based on components bought from an OEM.

The term is most often used in the computer industry, where products such as Windows will be referred to as OEM. A company like Dell Computers will incorporate the Windows operating software into its computers and sell the computers to its customers with the Windows product installed.

comments powered by Disqus
Hot Definitions
  1. Closed-End Fund

    A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange.
  2. Payday Loan

    A type of short-term borrowing where an individual borrows a small amount at a very high rate of interest. The borrower typically writes a post-dated personal check in the amount they wish to borrow plus a fee in exchange for cash.
  3. Securitization

    The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors.
  4. Economic Forecasting

    The process of attempting to predict the future condition of the economy. This involves the use of statistical models utilizing variables sometimes called indicators.
  5. Chicago Mercantile Exchange - CME

    The world's second-largest exchange for futures and options on futures and the largest in the U.S. Trading involves mostly futures on interest rates, currency, equities, stock indices and agricultural products.
  6. Private Equity

    Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity.
Trading Center