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Mainframe revenues slip again

On the heels of two down quarters, mainframe revenues slipped again. Analysts say customers are playing a waiting game with IBM, which is expected to announce a new mainframe next week.

Mainframe revenues nosedived this quarter as zSeries MIPS (million instructions per second) shipments were down 19% and revenues slipped 24% from last year. This will be the third consecutive quarter that mainframe revenues missed their mark.

The market's expectation for new mainframes may have contributed to the slump. New zSeries mainframes are slated to be announced next week, and ship toward the end of Q3.

According to Mike Kahn, managing director of Wellesley, Mass.-based Clipper Group, it's not uncommon for customers to have a strong inkling when something is going to happen.

"Details like pricing for new machines often happen at the last minute," Kahn said.

Kahn also said customers might wait for the price to drop on the old model.

Despite the downturn, Kahn said it's too early to call it a trend.

But continuing the upswing in zSeries growth from 2004 depends on what happens next.

"The next quarter will tell," Kahn said.

Hardware revenues overall decreased 25% (27%, adjusting for currency) to $5.6 billion in the second-quarter 2005 versus the year-ago period. But IBM found a bright spot in its pSeries Unix servers, which increased 36%, and xSeries servers and iSeries midrange servers, which increased 11% and 10%, respectively.

The company's financial report for the second quarter was mixed, despite CEO Sam Palmisano's announcement that Big Blue had "returned to form" after its Q1 woes.

Thanks to a $775 million antitrust settlement from Microsoft, IBM's net income increased 5.4% to $1.82 billion, but revenues slipped 3.6% to $22.3 billion.

IBM declined to comment for this article.

Let us know what you think about the story; e-mail: Matt Stansberry, News Editor

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