IBM Debuts New Mainframe in a $1 Billion Bet on Mobile

IBM z13 System
The new IBM z13 can encrypt and analyze data in real time and process 30,000 transactions a second. Photographer: Augusto F. Menezes/Feature Photo Service/IBM via Bloomberg

IBM is introducing a new mainframe in a bet that clients will need its souped-up speed and security to handle a surge in consumers using smartphones for everything from banking to checking health-care records.

The z13 system can encrypt and analyze data in real time and process 30,000 transactions a second, International Business Machines Corp. announced today. That means faster and safer transactions for consumers on mobile phones. The system is the result of five years of development and a more than $1 billion investment, said Donna Dillenberger, an IBM distinguished engineer who helped develop the machine.

The mainframe is one of IBM’s signature hardware products that will help sell related software and services, and it’s debuting at a critical time for the Armonk, New York-based company. Chief Executive Officer Ginni Rometty is trying to find new sources of revenue growth from mobile offerings, cloud computing and data analytics as demand for its legacy hardware wanes.

“When we are on our mobile devices, we only just want to wait for low single-digit seconds,” Dillenberger said in an interview. “Working on those types of problems drove us to ask, ‘How can we speed up these analytics?’ The z13 provides the capability to allow users to connect their mobile devices directly to the mainframe.”

The new system boasts improvements including the ability to perform data analytics on the machine itself, which IBM say can deliver insights faster and cheaper.

Hardware Declines

IBM declined to comment on how much customers will have to pay for the mainframe, which can typically cost hundreds of thousands of dollars.

IBM’s revenue has been dragged down by declines in the hardware business, where sales fell 15 percent in the third quarter. Part of that was due to a 35 percent fall in System z revenue because the latest model had been on the market for nine quarters, Chief Financial Officer Martin Schroeter said in October. Today’s announcement marks the start of a new product cycle for System z.

The pressure to find growth is on after IBM’s executives surprised investors in October by ditching a long-held earnings forecast and projecting profit to fall in 2014 for the first time in 12 years.

As Rometty works to reshape IBM into a provider of cloud-based software and services delivered via the Web, she also needs to update older offerings. This includes mainframes and other high-end servers, which help the company’s sales people sell software and services to accompany the systems.

“The mainframe software business, though a very sturdy business for IBM, is not a growth business,” Steve Mills, executive vice president of IBM Software and Systems, said at the Credit Suisse Group AG technology conference last month. “It’s a multi-billion dollar software business on the mainframe, and at the back end of those hardware cycles, that’s when you’re at the low point of the revenue flows.”

IBM is scheduled to report fourth-quarter earnings on Jan. 20, after the market closes.

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