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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (1622)	5/3/1999 1:10:00 PM
From: porcupine --''''>	Respond to of 1722

Powerful New IBM Mainframe By THE ASSOCIATED PRESS -- May 3, 1999 Hoping to lead the way to smoother online commerce, IBM is set to debut a new mainframe computer capable of processing 1.6 billion instructions per second, more than 50 percent more powerful than any machine on the market. The high-capacity business machines were to be introduced on Monday, less than nine months after the company released the first mainframe to break the 1 billion mark for instructions per second. The G6 is the first IBM mainframe to use the copper-semiconductor technology that the company introduced nearly two years ago. In addition to increasing speed and capacity, copper chips cost less and use less electricity than those made with aluminum. The metals are used to carry signals between millions of transistors packed into each thumbnail-sized piece of silicon. The product launch comes at least a month ahead of schedule and the jump in performance capacity is much larger than expected. ''They were not expected to hit these levels until the middle of next year. It's really quite a surprise,'' said John Jones, an industry analyst with Salomon Smith Barney. That type of power, he said, could help online retailers, Web brokerages and other frequently overwhelmed e-businesses better ''handle the transaction volume growth that's being created by the explosion of demand coming from the Internet.'' The G6, so named because it's the sixth generation of IBM mainframes based on an industry format known as S/390, is clearly designed with an eye toward the furious, system-clogging pace of growth in the everyday use and uses of the Internet. But IBM remains most determined to dominate the market for electronic commerce between companies, an even faster growing part of the market. ''While the explosive growth of holiday shopping over the Internet last year created many headlines, business-to-business e-commerce far outpaces consumer spending,'' IBM said in a separate press release announcing plans for a new center to help companies develop systems for processing electronic transactions. The announcement noted forecasts from Forrester Research Inc. that business-to-business transactions could grow to $1.3 trillion worth over the next four years, up from $43 billion in 1998. No exact pricing for the new G6 line was disclosed, but in trying to stake a claim in such a lucrative, but rapidly evolving market, IBM faces many of the same competitive pressures as any Internet start-up. ''Given the trends in last two years and the competitive situation that they have with the Hitachi Skyline product, I would expect that they will continue to price this machine aggressively,'' said Jones, suggesting that IBM might hold prices steady with those charged for the G5 mainframes currently on the market. Hitachi, which has lost considerable market share since IBM introduced the G5, is expected to release the next generation of its Skyline mainframe later this year which will be able handle roughly 2 billion instructions per second. At present, the cheapest G5 mainframe may sell for between $600,000 and $900,000, while ''full-blown'' machines may cost nearly 10 times that amount, said Jones. If the same pricing schedule was established for the G6, customers would be paying for processing power at a rate of $2,700 for every ''million instructions per second,'' or MIPS, the most common yardstick for measuring mainframe capacity. That would represent a drop of 33 percent from the $4,000 per MIP that G5 customers have been paying. Even so, strong demand for the powerful new mainframe could provide a boost to IBM's financial performance. The company plans to begin shipping the G6 in late May, early enough to have an impact on the current quarter's results. ''If they can get any kind of volume out this quarter, it looks like it would have a positive impact on their revenue growth in this segment in the business,'' said Jones, noting that while IBM holds 82 percent of the S/390 market, mainframes account for just 6 percent or 7 percent of IBM's sales.