Mainframes Remain Lucrative Business for IBM

Published on October 9, 2009
by William M. Bulkeley and Keith J. Winstein

A mainframe computer may seem as out-of-date as a typewriter in the age of Google (GOOG) and iPhones. But the half-century-old business is still crucial and lucrative enough to be drawing scrutiny from U.S. antitrust investigators.

International Business Machines Corp. (IBM) is now almost alone in the market for mainframes: high-end computers that run everything from Amtrak’s reservation system to benefits payments for the Social Security Administration. Market-researcher IDC estimated that in 2008 mainframes accounted for 9.9 percent of the world-wide $53 billion server market.

Toni Sacconaghi, an analyst for Sanford C. Bernstein, estimates that IBM’s direct revenue from sales of its System Z mainframes was about $3.5 billion, or less than 4 percent, of its $103.6 billion in2008 revenue.

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