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Tuesday, October 31, 2006

Mainframe Madness (IBM)(HPQ)(DELL)(SUNW)(UIS)

Almost everyone in the tech world figured that mainframes had given way to huge clusters of cheap servers. Think again.

IBM's mainframe revenue was up 25% last quarter. Although mainframe revenue at the computer giant was only about $2.3 billion out of $65 billion, the purchase of a mainframe leads the customer to buy boat loads of software and maintenance. Long tail.

IBM has been busy resurrecting the mainframe with programs to market the expensive computers to smaller businessses. The revenue figures show that the move is working.

The news is good for Unisys and other, smaller mainframe companies. But, if the trend grows, it may not be so good for Sun, Hewlett-Packard, and Dell who make a great deal of their money from inexpensive servers.

Although there has been little news from IBM about building a class of computer between the mainframe and the low-end server, it is worth keeping an eye out.

Digital Equipment Corporation, now gone the way of the buffalo, made a huge business out of selling mid-range computers, called mini-computers during the 1960s, 1970s, and 1980s.

DEC was eventually bought by Compaq which was swallowed by Hewlett-Packard, which lost CarliaFiorini her job. But, just because she is gone it does not mean that the mainframe is.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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