IBM resurrects mainframe computer

NEW YORK: IBM will unveil a new version of mainframe computer that could boost revenue and earnings this quarter.

IBM built its business on the back of the mainframe computer, a dinosaur that has survived technology changes that have made most computers much smaller and cheaper than a mainframe.

IBM will unveil details of the computer, code-named T-Rex, which goes on sale in mid-June, at a meeting on Tuesday in San Francisco that will also include other announcements from its giant global services business, analysts briefed last week on the new technology said.

The computer services, hardware and software company declined to comment on the analyst briefing on the mainframe or on the content of the meeting on Tuesday.

While mainframes are declining as a percentage of overall revenues, the timing of the launch is important because IBM typically markets mainframes to its customers ahead of the release, Sanford C. Bernstein analyst Toni Sacconaghi wrote in a research note.

With an estimated 40 percent of IBM's profits tied to its mainframe business, Sacconaghi estimates that an upgrade boosts revenues by 1 percent to 2 percent and earnings by 3 cents to 4 cents per share in the quarter it is introduced.

The new system has more powerful processors, new memory, and an updated version of the operating system, said Gordon Haff, an analyst with market research firm Illuminata, who was briefed on the system.

"Essentially it is an enhancement, not a radical departure," Haff said. "If you don't enhance a product line, it dies off over time."

IBM has been selling large financial, insurance, communications and retail customers these large computer systems for decades and last unveiled a new machine in 2000.

The computers are aimed at these companies whose processing and transaction systems are based on computer code that only a mainframe with its large capacity can handle, said Carl Greiner, an analyst at market research firm Meta Group in Stamford, Connecticut, who was briefed last week.

"These are older organizations that have a history of legacy code. It's complex code. You can't replace this stuff," Greiner said.

IBM Chief Executive Officer Samuel Palmisano will likely discuss the new mainframe along with other moves that fit into IBM "on demand" computing strategy when he meets with financial analysts and investors on Wednesday in Boston.

"On Demand" computing is aimed in part at making computing cheaper through more flexible pricing.

© Reuters