View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Technology
November 23, 1987

RESUMPTION OF GROWTH AT IBM THREATENED BY LONG SLOWDOWN IN MAINFRAME MARKET

By CBR Staff Writer

IBM shares were off 62.5 cents at $117.125 in early trading yesterday morning, not least because of a decidedly bearish feature on the company in the US edition of the Wall Street Journal. Pitch of the piece was that while it is widely recognised that IBM has an uphill struggle to increase market share in the small mainframe and personal computer sectors of the market, prospects for a resumption of rapid growth in the mainframe sector – the engine room of IBM’s business – over the medium term are also far from rosy. The Journal cites a forecast from the Computer & Business Equipment Manufacturers Association suggesting that as minis and micros assume more mainframe applications, average annual growth in mainframe sales between 1986 and 1996 will be just 3.3%, against 8.8% for minis and supermicros and 14% for personal computers. In the last sector, CBEAMA sees sales of personal computers outstripping sales of mainframes by value in 1989, and by 1996 coming out at more than double the value of mainframe sales. IBM’s decision to launch the Personal System/2 without a native operating system, and to make the machine feature for feature only about as good as Apple’s Macintosh rather than substantially superior, begins to look more and more like a fatal handicap to IBM’s hopes of regaining supremacy in the personal computer business rather than simply the leading purveyor of one of three competing standards. The year’s grace between launch and the availability of something that can be used as a viable alternative to the Macintosh has given Apple a vital window of opportunity in which to penetrate the corporate market, and one which has been grabbed to such effect that users attracted by the features of the Macintosh are likely to decide to buy the Real Thing from Apple rather than what will appear like a copy when it is fully available in competitive form from IBM. Gang-busters In the mainframe market, the Journal suggests that users already have more mainframe MIPS than they know how to use, and that the erosion of IBM’s market share by plug-compatible manufacturers has not been halted or turned back, but threatens to continue to grow. IBM’s share of the IBM-compatible mainframe market is now down to 85%, and is not likely to improve until volume deliveries of Summit get under way in 1991 or 1992 – and then only if the company is able to come up with enough tricks to tempt customers while making the compatible manufacturers pause while they attempt to emulate them. In the data storage arena, the erosion of IBM’s share has been even worse, with its proportion of its own market now down to 75%. That should improve when the new 3380s start shipping – but only for a couple of years at best. The one area that is going gang-busters for IBM is mainframe software, where the company has been able to hike prices by 30% to 35% a year, making more profit than on all mid-range machines and micros put together. But the settlement with Fujitsu means that even in system software, IBM’s freedom of action is unlikely to remain unfettered for much longer. There is no value to Fujitsu in paying IBM large royalties under the terms of the arbitration settlement unless it plans to compete fiercely with IBM in mainframe software in the US and Europe – and that inevitably means competition on price.

Websites in our network
Select and enter your corporate email address Tech Monitor's research, insight and analysis examines the frontiers of digital transformation to help tech leaders navigate the future. Our Changelog newsletter delivers our best work to your inbox every week.
  • CIO
  • CTO
  • CISO
  • CSO
  • CFO
  • CDO
  • CEO
  • Architect Founder
  • MD
  • Director
  • Manager
  • Other
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU