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IBM has Sun in its eyes
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September 13, 1999: 5:17 p.m. ET
New high performance, lower cost servers take aim at market leader
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - Armed with a new high-speed copper chip, IBM Corp. unveiled an improved line of servers it says are significantly cheaper and faster than those of market leader Sun Microsystems.
The servers range from the compact RS/6000 B50 servers, available to Internet and application service providers for about $4,000, to a new RS/6000 S80 model that uses up to 24 of the copper chips, can support more than 16,000 users at once and goes for about $1.5 million. IBM (IBM) officials insist that is still about half the price of the 64-chip E10000 server from Sun. And they say the use of the copper chips allows it to function faster than the current Sun server.
"The competition is to have to take some substantial price action to meet our price," said Debra Thompson, IBM's vice president of marketing for the RS/6000 product line.
The machines run on the Unix operating system, although IBM also announced plans to run most of the low-cost Linux applications on the servers by the middle of next year.
Officials at Sun (SUNW) did not immediately return phone calls about the IBM announcement. Sun is expected to roll out its next generation of servers in the middle of next year, said Laura Conigliaro, analyst at Goldman Sachs, and officials have promised to have a comparable performing machine available before then, she said. She also said that despite the fast pace of business on the Internet, many customers aren't going to shift immediately, even if IBM has taken the lead in both price and performance.
"I think what we've seen is with a lot of hardware introductions, even when companies come out with strong price/performance changes, it takes more than just that to rebuild momentum in the market," she said. "If you've got users who are comfortable with one vendor, even if that vendor fall behind, the customers assume they will leap frog forward again."
IBM is third in this segment of the server market behind Sun and Hewlett-Packard Co. (HWP), Conigliaro said. IBM's new machines are good ones that should help its position in the market, but only if it can maintain that performance for a sustained period, she said.
"I expect them to help improve IBM's RS/2000 revenue," she said. "Does it catapult them to a position where they can butt heads with Sun? It's hard to say, but at this stage, I doubt it."
IBM's roll-out of the product in New York Monday included a former Sun customer who admitted to never having considered IBM servers in the past.
"Anytime you want to build something for real on the Web, as far as I was concerned, you'd build it on Sun," said Jay Chavez, vice president for worldwide Internet services at Ursus Telecom Corp. (UTCC), who was looking for servers earlier this year for the company's new Internet telecom service. "When the IBM engineer came in, I expected to blow him out of the water the first day."
But Chavez said the hardware capability more than even the price sold him on changing to IBM.
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