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Revenues for the zSeries down 16%

After 18 months of unfettered growth, the zSeries saw its first significant drop-off in revenue in Q1 2005. But analysts are quick to point out that the slip is hardly a trend -- at least not yet.

IBM Thursday announced its zSeries revenues for the first quarter of 2005, and after the year Big Blue had with its mainframe line in 2004, the news was not especially good.

Revenues from the zSeries decreased 16% compared with the prior-year quarter, and the total delivery of zSeries computing power as measured in MIPS (millions of instructions per second) decreased 11%.

While the words decrease and revenue are never something IBM wants to see in the same sentence, Charles King, principal analyst at Hayward, Calif.-based Pund-IT Research, warns folks not to get too worked up over the latest numbers.

"It's probably the market settling out a little bit," King said. "The first quarter tends to be a bit flat, and frankly the Z had a real bang-up year last year. Sales of the Z were far better than anyone expected. One quarter doesn't make a trend."

The mainframe, long left for dead by many analysts in the industry, has managed not only to survive, but thrive over the past few years. Revenues for the zSeries jumped 33% in 2003 and saw gains of 34% in Q1 2004, which was followed by consecutive quarters of 12% growth. Though revenues finally slipped slightly in Q4 2004, MIPS jumped 6% during that time.

Gordon Haff, an analyst with Nashua, N.H.-based Illuminata, agrees with King's sentiment that it's too early to dub this downturn a trend. But Haff said you can't argue with the fact that IBM's mainframe sales have hit a wall since the fall of 2004.

"If next quarter were to be down, that's when you go, 'Yeah this is a trend,'" Haff said. "One of the problems when you're doing well is that it can be hard to follow up on that. But for the past six months the Z has clearly not been growing."

For more information:

IBM mainframe revenues finally slip

zSeries defies industry, maintains revenue growth

But a lack of growth does not mean that the IT community has suddenly lost faith in the mainframe, according to King.

"The performance last year of the zSeries shows that the platform is alive and well and that IBM is on the right track. People still equate the mainframe with the highest reliability, security and performance," King said. "One off quarter does not mean the zSeries has gone down the drain."

Let us know what you think about the story; e-mail: Luke Meredith, News Writer

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