IBM plans big hardware upgrade next year

IBM disclosed the plans at a time when server sales among all vendors have taken a bruising during the economic downturn, and IBM is no exception. In a third quarter earnings call yesterday, said Mark Loughridge, IBM's chief financial officer, said that the company's third quarter mainframe revenue declined by 26% from the year-earlier period.

Nonetheless, Loughridge said IBM is optimistic about the hardware business in the near future in a climate of what he called a return to “general stability.”

The new Power7 chip will offer up to eight cores and increase support for virtualized environments, executives said. IBM has slowly be releasing specs for Power7, which it says will support 1,000 virtualized machines, almost four times the 254 supported by the dual core Power6 chip that was released in 2007. IBM's Power chips support AIX, Linux and the older System I computers.

IBM released its last mainframe, the z10, in February, 2008, and typically releases a new mainframe every three years. If it keeps with that schedule, the new mainframe probably won't be shipping until late next year.

Gordon Haff, an analyst at Illuminata Inc. in Nashua, N.H., said IBM's next mainframes may help users cut costs by allowing them to move some of the mainframe processing to IBM x86 systems. In a hybrid system, the mainframe may handle the service management and data storage with the x86 systems performing some of computational work, said Haff.

IBM has tried to cut user costs in the current mainframe line by using specialty processing engines, such the Linux IFL processor.

The ability to offload mainframe work to the x86 systems of multiple vendors is one of the reasons cited by the Computer and Communications Industry Association (CCIA) trade group in its effort to trigger a new antitrust inquiry into IBM practices by the Department of Justice. The trade group claims that IBM is blocks third party vendors from offering such an offloading capability.

Rich Partridge, an analyst at Ideas International Inc. in Rye Brook, N.Y., said that with increases in throughput and processing power in the next mainframe, IBM will probably encourage users to replace servers with mainframes to cut back on data center sprawl. The argument for “more centralized computing infrastructure will play to the mainframe,” he said.

IBM's planned hardware improvements come as Oracle Corp. outlines more of its plan to integrate Sun Microsystems Inc. once its deal to buy the struggling computer maker closes. Oracle CEO Larry Ellison went into overdrive about IBM at company's annual conference OpenWorld, vowing to vanquish IBM.

IBM CTO Alan Ganek was sanguine about IBM's prospects in any head-to-head performance metric match up.

“Oracle is a competitor and will always be a partner,” said Ganek, of Ellison's attack, “but I don't see any change here I'm worried about.”

Meanwhile, Loughridge noted that IBM's software's sales improved in the third quarter. He cited In particular a 2% increase in sales of the company's major middleware products, such as the WebSphere, Tivoli, Lotus and Rational product lines.

Ganek said in an interview that improvements in the WebSphere and other middleware lines generally are the result of automating businesses processes, so that a user's data can flow through the process end-to-end.