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IBM's Mainframe Wins Customer
[June 30, 2010]

IBM's Mainframe Wins Customer

Jun 30, 2010 ( via COMTEX) -- International Business Machines Corp. (IBM) announced that Comepay, a leading provider of self-service payment kiosks in Russia and the Commonwealth of Independent States (CIS), has chosen its System z10 mainframe to use it in its core business operations. Comepay is expected to deploy the new System z mainframe by the end of the second quarter of 2010. Financial details on the deal were not provided.

With operations in 11 regions of Russia, the new System z10 mainframe deployed from IBM will enable Comepay to expand its business operations across the country. This will aid the company to run a predicted three-fold increase in transactions from 10,000 to 30,000 per second. Moreover, the new systems will help augment growth for Comepay by providing cost effective services and adequate support to its customers.

The performance and virtualization capabilities of System z mainframe, running on z/os will enable Comepay to process the growing amount of transactions and meet business-critical data processing requirements at a lower total cost of ownership. IBM's DB2 and WebSphere MQ software will facilitate Comepay to enhance its information management capabilities while improving the security and reliability of its transaction processing center, the company said.

IBM's System z mainframe can help organizations in emerging markets to manage their businesses. IBM pointed out that Comepay will add to its expanding customer base in growing markets, already comprising major customers in China, Korea and Namibia, namely China Internet Network Information Center, Korea's BC Card and Dongbu Insurance and The First National Bank of Namibia.

Based on the strength of its global on-demand model (responding to customer demand with flexibility and speed), IBM plans to grow revenues in all geographical regions, with robust growth in emerging markets such as Brazil, Russia, India and China (BRIC).

IBM's Systems and Technology segment is also witnessing growth. Systems and Technology revenues spiked up 9% (2%, adjusting for currency) year-over-year to $3.4 billion in the most recent quarter. Systems revenues rose 4%, attributable to an increase in System x revenues, which grew 36%. This was offset by a decrease of 17% in revenues from POWER Systems. Revenues from System z mainframe server products decreased 17%, while the hardware revenues that include servers and high-end mainframe computers soared 5% in the quarter.

IBM is expected to get a boost from new mainframe contracts. As virtualization drives richer server configurations, IBM is targeting $9.3 billion in gross profit, for 2010, for the Systems and Technology segment. We expect the next generation mainframe product to deliver a higher benefit to the company, thereby extending the company's leadership in energy efficiency, security and resiliency.

Although global sever revenues fell, IBM has again topped the server market in 2009 with a 32.9% factory revenues share compared with Hewlett-Packard's 29.9%, according to IDC. This growth was driven by a solid performance from its System x, System p and System z servers.

To focus on its investments on differentiating technologies with a high-growth potential, IBM has launched new products and solutions including its new WebSphere Portal software, version 6.1, POWER6, BladeCenter-S, BladeCenter QS22, System z10, Power, System x servers, high-performance computing, virtualization, energy efficiency, and IBM System Storage SAN Volume Controller (SVC) Entry Edition.

The next generation mainframe product will likely benefit the company, moving forward. This product will have a 50.0% additional capacity than the current system. This should give IBM a competitive edge over Hewlett Packard Co. (HPQ), whose next-generation chip is not expected to catch POWER6 Processor's speed.

We maintain our long-term Neutral recommendation on IBM.

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