IBM Corp’s beleaguered RS/6000 division sent some big guns down to Wall Street this week to try and convince technology-watchers that shipments of its forthcoming Raven servers will ensure the division’s fourth quarter numbers rebound after a disappointing first half. The RS/6000 division, which recently scrapped plans to productize the IBM/Motorola Somerset design labs’ 64-bit […]
IBM Corp’s beleaguered RS/6000 division sent some big guns down to Wall Street this week to try and convince technology-watchers that shipments of its forthcoming Raven servers will ensure the division’s fourth quarter numbers rebound after a disappointing first half. The RS/6000 division, which recently scrapped plans to productize the IBM/Motorola Somerset design labs’ 64-bit PowerPC 620 RISC, is instead focusing its initial 64-bit effort on the commercially-oriented 64-bit PowerPC Apache chip developed by its AS/400 cousins which will power the Raven line, due in October. RS/6000 bills itself as a $3.5bn concern, claiming a 10% share of a $35bn Unix market, behind leading vendors Sun Microsystems Inc and Hewlett-Packard Co. IBM told Merill Lynch & Co analyst Steve Milunovich that its expects growth in the market will be restricted to a single digit as declines in the Unix workstation business, where Windows NT is nipping at Unix’s heels, offset increases in sales of servers. IBM breaks out its Unix business as 25% workstations/workgroup servers, 50% enterprise servers, and 25% large systems (SP2). RS/6000 sales were off about 15% in the first half. Workstations declined 15% to 20%, enterprise servers were down as well, while the division’s star performer continues to be SP2, up around 40%. Milunovich says margins were probably up as the mix shifted toward large servers – management said its gross margin compares favorably with Sun’s 50% – and believes the RS/6000 line is profitable. He expects to see a modest year-to-year growth beginning in the fourth quarter with the main impetus being sales of Raven systems. The 12-ways are expected to deliver over 18,000 transactions per minute running a 64-bit version of AIX. IBM is expected to improve its unglamorous Unix image with an increased focus on developing industry solutions for its 2,000 sales people to take to market. Over half of the workstations sales now are driven by the hugely popular – the aerospace and automotive design community – Dassault SA’s Catia application. Indirect channels will also be emphasized for leverage; 60% of 1997 RS/6000 sales will go through business partners. The number of models in the price book is being slashed from hundreds to tens.
Fend off Microsoft
As already reported, IBM is also converging its PowerPC processor development streams now that its initial goal of competing with Intel Corp for the desktop has been lost. The 604e which runs most of RS/6000’s system will be replaced by the 630 next year, which will also absorb the Power2 instruction-set P2SC ‘super- chip’ used predominantly in the SP2. To replace Apache, AS/400 is developing a next-generation 1GHz PowerPC AS chip called Northstar due around 2000. IBM told Milunovich that in the market its sees Sun most often thanks to Sun’s Unix-only focus. HP has faded, partly due to its V-class high-end servers being late to market. While DEC isn’t on the radar. Given its own aborted attempt, IBM’s also skeptical about Silicon Graphics Inc’s ability to pursue sales of NT at the low end while retaining Unix at the high end. It expects Sun and itself to be the major Unix players in the long term and while the company hedged when we asked if IBM might adopt some form of Sun’s Solaris… we think Sun and IBM could end up working closely on Unix to fend off Microsoft. One problem Sun doesn’t have is its own database. Merill Lynch says that because IBM competes in the open systems market with DB2, Oracle and others database companies are less likely to recommend the RS/6000 as the platform on which to run their products.