While IBM Corp’s second quarter showed some bright spots, including software and services, Big Blue was hit by poor hardware sales. Its Wall Street boosters have picked over the finer grain details not available to the rest of us. Merrill Lynch & Co says IBM’s mainframe sales were down 25% in the quarter – actual MIPS shipped were flat – as some users wait for the G5 Symphony processor mainframes, which will be delivered beginning August. And Morgan Stanley Dean Witter tips the bi- polar mainframe upgrade business to be worth $685m to IBM over six quarters beginning in the third quarter. It thinks 80% of bi- polar mainframes will be upgraded as less maintenance, facilities, and electricity charges will effectively pay for the new server. It also believes IBM will gain share from Hitachi Data Systems and Amdahl Corp at the very high end, claiming IBM scored 140 competitive win backs versus Hitachi and Amdahl during the quarter. Meantime Merrill says the reason why RS/6000 sales were down 10% was because of mismanagement of the SP2 product transition in the US. In addition, AmeriQuest Technologies Inc a reseller of its RISC and Intel servers, went out of business. When Computer 2000 sold its disastrous holding in the ailing AmeriQuest back to the former management (CI No 3,446), the executives, trading as Listen Group Partners LLC, won a release from all obligations and returned AmeriQuest’s inventory to its owners. Morgan Stanley puts the decline in RS/6000 business at 7% – the divsison’s worst performance since 1995 – and while the servers and SP2 are to get the Northstar (Power3) PowerPC chip later this fall – it still has trouble believing a quick turnaround for servers is in the offing, the brokerage says. It could mean a fall-off in sales before the Northstars actually ship like S/390s before Symphony. It also thinks that the lack of a publicly-declared AIX route to Merced means that IBM’s Unix is at a disadvantage to Sun, Digital, and HP. It also needs to differentiate the line from the AS/400 as the products become more and more similar. Merrill Lynch estimates PC sales fell 27% as units sold into the channel rose modestly to bring inventory closer to IBM’s four-week target. About two-thirds of commercial shipments were under the Advanced Fulfillment Initiative, where contracts dictate two-to-four weeks of channel inventory. Morgan Stanley figures the decline was a point worse. AS/400 hardware sales were flat while storage rose 20%, led by a 50% increase in disk sales.
