IBM brings back-to-the-future mainframe to present

SAN FRANCISCO Tue Feb 26, 2008 1:46am EST

View of IBM headquarters at la Defense in Paris, May 6, 2005. IBM is set to launch the latest update of its powerful mainframe computer on Tuesday, a more energy-efficient machine that it hopes will compete with high-end computers from rivals such as Hewlett-Packard Co and Sun Microsystems Inc. REUTERS/Philippe Wojazer

View of IBM headquarters at la Defense in Paris, May 6, 2005. IBM is set to launch the latest update of its powerful mainframe computer on Tuesday, a more energy-efficient machine that it hopes will compete with high-end computers from rivals such as Hewlett-Packard Co and Sun Microsystems Inc.

Credit: Reuters/Philippe Wojazer

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SAN FRANCISCO (Reuters) - IBM (IBM.N) is set to launch the latest update of its powerful mainframe computer on Tuesday, a more energy-efficient machine that it hopes will compete with high-end computers from rivals such as Hewlett-Packard Co (HPQ.N) and Sun Microsystems Inc JAVA.O.

The new mainframe, like earlier versions dating back to the last century, features an all-in-one computing framework for processing volumes of data for customers such as banks, insurers and retailers.

The first upgrade to the mainframe since 2005, it is also more power-efficient and secure, addressing two customer concerns as data-center energy costs soar and security threats mount, International Business Machines Corp said.

The refrigerator-sized machines, called System z10, begin shipping on Tuesday and start at just under $1 million. They are 50 percent faster than their predecessors, the z9, and have up to 70 percent more computing capacity. IBM also says they're more energy efficient.

Mainframes, once IBM's core product and long a reliable source of revenue from software and services required to run them, now account for a smaller slice of IBM's sales as the company moves to higher-profit technology services and software.

IBM's mainframe revenue fell 15 percent in the fourth quarter, mainly because customers waited for the new model before upgrading. IBM's revenue from hardware fell 3 percent in 2007 to $21.3 billion, accounting for 22 percent of IBM's total revenue of $98.8 billion, which was up 8 percent from $91.4 billion in 2006.

The company expects to see "the real benefit" to its revenue from the new mainframes in the second quarter, with the current quarter "a period of product transition," Chief Financial Officer Mark Loughridge said on a conference call with analysts in January.

The machine faces competition from nimbler and less expensive server computers from HP, Dell Inc DELL.O and Sun Micro, among others, whose top-line server computers cost more than $250,000 and perform many of the same functions as IBM's mainframes.

IBM says its expensive behemoths are not dinosaurs because they are more efficient and less costly, over time, than combining hundreds of smaller computers to achieve the same results.

IBM, based in Armonk, New York, is the world's largest server computer maker, with 31.1 percent of global server revenue in 2007 followed by HP with 28.3 percent, according to market researcher Gartner Inc.

IBM said the z10 machines have the computing power of 1,500 standard business server computers, but are smaller and 85 percent more energy-efficient than such a server cluster.

"If you want to run particularly large-scale transactions with large transactional databases in the most secure, bullet-proof environment, then the mainframe is for you," David Gelardi, vice president of industry solutions for IBM's systems and technology group, said in an interview. "Yes, it's an expensive machine. No question about it, but you get a lot for your money."

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