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To: Tony Viola who wrote (128673)	3/1/2001 4:06:50 PM
From: Gary Ng	Read Replies (1) \| Respond to of 186894

Tony, Re: . If IBM is having a good quarter, dollars to donuts it's because of their new mainframe they just came out with last quarter Will that have some positive spin on EMC ? gary

To: Tony Viola who wrote (128673)	3/1/2001 4:09:41 PM
From: John Koligman	Respond to of 186894

Tony, I'm sure the G7 is having an impact as it is selling well. Other thing is that IBM did okay in it's last report and did not guide down. They have an absolutely huge services backlog.. I've talked with Arrow on the IBM thread on and off over the years, he is pretty knowledgeable about this end of the business... Regards, John To:Hsien W. Chang who wrote (7067) From: Arrow Hd. Monday, Feb 26, 2001 11:51 AM View Replies (1) \| Respond to of 7077 Hsien, thanks for your kind words. I agree that G7 will be a huge difference this quarter. The high end server line (mainframes of old) has become cyclical with a new line having a good two quarter period and then the sector gets tough again with demand slacking off some until the next turn. This quarter is the sweet spot for the sector which, excepting high end legacy software, has the highest profit margins of any IBM product. The first quarter last year still had Y2K indigestion so the YOY comparisons should be favorable. Another factor is that Sun and others sold into the Dot.Com space with a lot deals that included credit. They do this to drive market share which gets far too much attention in my opinion. I would rather have a profitable sector and follow than be a loss leader with top market share. IBM made these kinds of decisions in the PC space the last few years basically shedding the unprofitable consumer PC business. Anyway, the credit deals I believe continue to be a potential accounts receivable issue possibly requiring write-offs or restatements for some of these companies because they are not going to be paid and any equity parachute they had is now worthless. That is why there may be a head fake here. Tech companies talking down business, not because business is that bad, but because they will need to take charges this quarter to clean up last year's bad business. In essence, setting the right level of expectation but for the wrong reasons. The April reporting season will require a lot in-depth review of the SEC filings to see the details behind the numbers. Listening to the CC will not be enough. IBM did not participate in this kind of activity on any kind of scale. Their credit and firm order policies are more restrictive and they are less likely to buy the business. The field sales forces are delegated only modest latitude in adjusting price, terms and conditions and general business practices. Those disciplines are powers reserved for other Operating Unit's Finance and Legal departments. So the ability to become drunk and disorderly is limited. Another issue that came up with Sun is the potential to now be exposed to the used market since a defunct Dot.Com is going to sell their IT inventory into the open market. As mentioned above, IBM is not going to have a lot of this since their conservative approach insulates them to some degree. Second, IBM's Credit Corporation owns much of this equipment through the assignment of sale to ICC so an IBM internal operation can assist in maintaining an "orderly" market of price, supply and demand recognition through a blend of new and used offerings or, in some cases, a combination of a used base machine and a new upgrade to it which blends both the used price of old MIPs with the new price of the upgrade to the new function, performance and capacity of new MIPs from the installation of a new MCM (Multi-Chip Module or engine). Older equipment such as the Bi-Polar processors in 3090 and ES/9000 technology simply get crushed. This protects the price points and product margins. Currently installed IBM Server products can also be upgraded minimizing the cascading of processor complexes throughout the world's markets. A 13 MIP R1 from the early 90s has maintained it's same serial number through seven generations of Server technology announcements and machine upgrades all the way to today's G7. This means no asset de-acquisitions and used machine cascading, only an extension of the ICC term lease master agreement and the upgrade is net-priced for only the delta MIPs and contractually it is a returned parts upgrade which has the "old" engine coming back to IBM in return for the installation within the existing machine of the "new" G7 engine. Extremely efficient, best possible price to the target machine configuration, least data center disruption, no requirement for an external bid process, and no cascading of systems or system parts and sub-assemblies. No one else does this. Sun, HP, and the others are strictly a gross business model, with maybe some trade-in options, which in times of rapid growth serves them well but now it will haunt them. So IBM is not immune but does have some degree of immunization and with the G7 cycle offering a 1H bubble I think IBM can weather this downturn as long as the recovery starts in the third quarter. JMHO, of course.