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IBM Bets $1 Billion on New Mainframe in Shrinking Market

IBM zEnterprise mainframe computers. Source: IBM
IBM zEnterprise mainframe computers. Source: IBM

Aug. 28 (Bloomberg) -- International Business Machines Corp. spent more than $1 billion over four years to develop a new mainframe computer, betting it can keep up with businesses shifting to cloud-based software and storage.

The Armonk, New York-based company is unveiling the zEnterprise EC12 mainframe server today, the latest iteration of a 48-year-old product. It’s the outcome of more than $1 billion in research and development around the world to make the fastest and most secure IBM mainframe yet, said Rod Adkins, senior vice president of systems and technology.

Even as IBM shifts its focus to more profitable businesses such as software, “the mainframe is central in that strategy,” Adkins said in an interview. “When you think about how our business model over time will continue to drive more from software and services, you still have to have the foundation.”

Revenue in IBM’s System Z mainframe line fell 17 percent in the first half from a year earlier, contributing to a decline in the $8 billion systems and technology business, according to a regulatory filing. The company won’t offer financial forecasts for how the new product will perform, Adkins said.

Large enterprises such as banks, retailers and government agencies buy mainframes to support their data systems. IBM’s EC12, the first update since 2010, has 50 percent more capacity than its predecessor and runs at 5.5 gigahertz, the fastest in the industry, Adkins said. It’s also designed with built-in security software and support for private cloud environments, meaning a business can run thousands of systems on one mainframe.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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