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IBM Adds Cheaper Power Servers to Expand in Emerging Markets

Feb. 5 (Bloomberg) -- International Business Machines Corp., the largest computer-services provider, will sell a cheaper set of high-end servers in a bid to reach customers in emerging markets.

The new range of Power computer mainframes starts at $5,947, about 50 percent cheaper than their predecessors, said Rod Adkins, senior vice president of IBM’s Systems & Technology Group. The lower price may help IBM sell more sophisticated servers in developing countries in Africa, South America and Southeast Asia, while opening up the chance for upgrades and add-ons later, Adkins said.

“You have customers that are dependent on what they can afford, and this puts Power into their path,” said Adkins, who will announce the news in Johannesburg today. “Some customers might decide to act small now, and because these products can be scaled they will buy more.”

As the mainframe becomes a commodity because of standard, widely available components, Armonk, New York-based IBM has focused on selling higher-end products to customers like banks and governments that are willing to pay up for sophisticated analysis and security tools. With the new products, IBM may be able to sell its own computer servers to businesses that previously used cheaper, generic hardware.

IBM is betting on emerging markets to carry out this trend. Revenue from those countries rose 4 percent in 2012, compared with a 2 percent drop for the company overall. Revenue for Adkins’s hardware group slipped 7.5 percent, to $18.3 billion.

The Power systems servers, as well as IBM’s higher-end zEnterprise mainframes, can be tailored to analyze large sets of data. Watson, the IBM computer that beat humans on the trivia show “Jeopardy!,” is built with Power servers. The cheaper versions will be available worldwide.

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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