When IBM unveiled several new and improved System i models two weeks ago, it quietly made other announcements that expanded the options of its midrange customers. Since my colleague Maria DeGiglio covered the new server announcements last week, I'll use this week's article to take a closer look at what else Big Blue is offering us. Once that is done, I'll look at how well the computer giant and the System i did financially during the second quarter of the year.
When PHP Means "Pretty Hot Package"
If you've been itching to run PHP applications on the System i, I have good news for you. Starting on July 28, you can order two PHP products for i5/OS V5R4 at no charge. The first product, Zend Core for i5/OS, is a runtime environment for PHP applications that supports native access to DB2/400 and i5/OS data queues. Zend Core for i5/OS includes code for linking PHP scripts to RPG and COBOL applications. The second product, Zend Studio Professional for i5/OS, provides a complete development environment for PHP applications.
Customers that order these products from IBM will not only get them for free, but also receive a complimentary three-year subscription to software updates and Web-based support. Phone support is available from Zend for an additional fee. To take advantage of this offer, place your order through your IBM representative or Business Partner. The product number for Zend Core for i5/OS is 5639-ZC1; the number for Zend Studio Professional is 5639-ZS1.
Thin Is In
To make it easier to operate the latest System i models, IBM is now offering a Thin Console as an alternative to the more complicated Hardware Management Console (HMC). The Thin Console—which IBM is sourcing from Neoware—plugs into the HMC port and provides a 5250 green-screen display for accessing operator console functions. At $699, the Thin Console is significantly less expensive than the HMC. However, it can only support the System i5 Models 520 and 550 when running a single i5/OS partition and up to four Linux partitions using virtual I/O services. Organizations with more sophisticated partitioning needs will still need the HMC.
Speaking of such companies, IBM is now offering buyers of new Model 520s an option that it formerly reserved for larger systems. Customers can now specify where they want hardware components to be placed in the Model 520. Such custom placement can make it easier to install new systems, especially those that have multiple partitions.
Faster Chips...Lower Lease Rates
Meanwhile, back at the high end of the System i family, the Model 595 is getting a little facelift in the form of faster memory chips. Beginning on August 11, IBM will offer DDR2 memory features for the 1.9GHz version of the Model 595 as an alternative to DDR1 memory. While the DDR2 memory features are faster than their predecessors are, they cannot be intermixed with DDR1 chips on the same server. Moreover, the cost of replacing all DDR1 memory with DDR2 chips is prohibitive. As such, DDR2 memory only makes sense for new Model 595 purchases.
One option that could make sense for many customers is the latest System i5 lease offer from IBM Global Financing (IGF). Customers that currently hold an IGF lease on an iSeries Model 810, 825, 870, or 890 can upgrade to a System i5 and extend their current lease for 36 months at attractive rates. Companies that extend their leases during the third quarter of this year can get financing rates as low as 2.99%. In the fourth quarter, the rate increases to 3.49%. Either way, IGF claims that many of its leaseholders could upgrade to a System i5 and end up paying less per month on their extended leases than they currently pay.
Two Lines...Two Stories
As the last story indicates, IBM is eager to get its customers to upgrade to the System i. Part of that eagerness is due to the lackluster sales performance that the System i turned in for the second quarter of this year. For the quarter, System i revenues were 7% lower than the same quarter last year. That was a big improvement over the 22% sales decline of the first quarter, but a loss is still a loss.
Fortunately, the sales shortfall was caused not so much by a lack of demand as a lack of supply. According to IBM's CFO Mark Loughridge, the company was unable to fulfill its System i orders as quickly as usual because of supply chain execution problems. He blamed much of the problem on parts shortages that arose as the company worked to meet Europe's new Removal of Hazardous Materials requirements. Were it not for these fulfillment problems, Loughridge claimed that year-to-year System i revenues would have been close to flat.
While System i revenues may have been less than thrilling, they had good company. Several hardware and services divisions in the company reported lower sales for the quarter, leaving the company with an overall revenue gain of just 1%. By contrast, the company grew its income from those revenues by 9% and boosted its earnings per share by 14%. This reflects the company's recent actions to cut costs—including thousands of employees in Europe—and focus its efforts on selling higher-value products and services.
In short, IBM's second quarter looked much like the first one, with strong bottom-line growth and anemic top-line results. As any financial analyst will tell you, there is only so much that a company can do to boost earnings without growing revenues. While IBM will undoubtedly come up with new ways to wring more earnings out of its existing revenue base, it will inevitably have to figure out how to boost sales. There is no place in the company where that issue is more pressing than in the System i group, and the steps that IBM takes to boost sales there will speak volumes about what it will try to do across the rest of its product groups.
Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology. You can reach him at
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