IBM’s $5bn mainframe computer launched

The new systems, branded IBM Z, are priced starting at $500,000

               

  IBM has continued to update its mainframes over nearly seven decades through successive waves of computer design. Above, an IBM mainframe computer in 2015 international business machines Corp.on Monday is unveiling its next generation of mainframes, the industrial-strength computers that underpin industries like banking and insurance, highlighting an old product category that still drives much of its profit.

The new line of mainframe computers pairs what IBM claimed is the industry’s fastest processor with additional resources in a package designed to handle large-scale, ongoing tasks such as processing credit-card transactions.

In addition to increased speed, the company says the new systems, branded IBM Z and priced starting at $500,000, offer extra horsepower for encrypting data at all times throughout the system and automating compliance with international data regulations.

IBM said it expects the new units to be widely available in September.

Mainframes, which date back to the 1950s, in recent decades have been overshadowed by networks of smaller computers and, more recently, cloud computing. But their extraordinary reliability, security and ability to move data in and out means they continue to crunch numbers in the back offices of many large organizations.

IBM has continued to update its mainframes over nearly seven decades through successive waves of computer design, and now holds more than 90% of the market, according to analyst Peter Rutten at International Data Corp. Global sales of these powerful machines last year totaled $3.5 billion, according to market research firm Gartner  Inc.

Mainframe revenue last year accounted for a small slice of Big Blue’s total, but those sales combined with related support, software, storage and financing brought in 24% of revenue and 41% of operating profit, analyst Toni Sacconaghi of Bernstein Research wrote in a recent report. Mainframe sales are especially valuable to IBM as they support long-term customer relationships that drive further sales, especially software subscriptions that bring in stable recurring revenue, he noted.

IBM has mentioned the new mainframes as a factor in its 2017 results that will accelerate profits in the second half of the year as investment falls and sales kick in. The company’s financial forecast anticipates that it will generate 63% of its total, annual adjusted earnings per share in the third and fourth quarters. That would make the rest of this year one of IBM’s two highest-earning second halves in the past 20 years, according to Mr. Sacconaghi—an ambitious goal in his view.

IBM is expected on Tuesday to release its second-quarter results.

Users of conventional systems tend to perform encryption on limited portions of data at specific points in their use, leaving opportunities to copy unprotected data and consuming general computing capacity in the process.

By offering the option to protect data systemwide, IBM Z would help thwart such threats, according to Patrick Moorhead of Moor Insights & Strategy, a market research firm. “They’re definitely focusing on the right thing,” he said.

IBM isn’t the only maker of business hardware emphasizing data protection. Intel  Corp. on Tuesday launched its Xeon Scalable server chips, which accelerate encryption of data as it is being transferred to storage. Advanced micro devices  Inc.in June started selling its Epyc server-chip line, which encrypts data in memory. Equipment vendors such as Hewlett Packard Enterprise  Co. are beefing up security in other ways.

ADP LLC has been using IBM mainframes since 1957 to run its payroll processing and human resources businesses. Stuart Sackman, vice president of global products and technology at ADP, looks forward to using IBM Z’s new data-protection features to lock down personal information it maintains on some 30 million people.

“Our global security office—and our board—would be happy if we encrypted 100% of everything 100% of the time,” he said. “Historically that has been hard to do.”