IBM brings back-to-the-future mainframe to present

By Philipp Gollner

SAN FRANCISCO (Reuters) - IBM is set to launch the latest update of its powerful mainframe computer on Tuesday, a more energy-efficient machine that it hopes will compete with high-end computers from rivals such as Hewlett-Packard Co and Sun Microsystems Inc.

The new mainframe, like earlier versions dating back to the last century, features an all-in-one computing framework for processing volumes of data for customers such as banks, insurers and retailers.

The first upgrade to the mainframe since 2005, it is also more power-efficient and secure, addressing two customer concerns as data-center energy costs soar and security threats mount, International Business Machines Corp said.

The refrigerator-sized machines, called System z10, begin shipping on Tuesday and start at just under $1 million. They are 50 percent faster than their predecessors, the z9, and have up to 70 percent more computing capacity. IBM also says they're more energy efficient.

Mainframes, once IBM's core product and long a reliable source of revenue from software and services required to run them, now account for a smaller slice of IBM's sales as the company moves to higher-profit technology services and software.

IBM's mainframe revenue fell 15 percent in the fourth quarter, mainly because customers waited for the new model before upgrading. IBM's revenue from hardware fell 3 percent in 2007 to $21.3 billion, accounting for 22 percent of IBM's total revenue of $98.8 billion, which was up 8 percent from $91.4 billion in 2006.

The company expects to see "the real benefit" to its revenue from the new mainframes in the second quarter, with the current quarter "a period of product transition," Chief Financial Officer Mark Loughridge said on a conference call with analysts in January.

The machine faces competition from nimbler and less expensive server computers from HP, Dell Inc and Sun Micro, among others, whose top-line server computers cost more than $250,000 and perform many of the same functions as IBM's mainframes.