AS/400 7XX Shops Get Rebates on iSeries 8XX Boxes

by Timothy Prickett Morgan

IBM stopped offering upgrades from AS/400 Model 720, 730, and 740 servers to the iSeries 8XX machines in October 2003, in the hope that doing so would convince customers to upgrade before the end of the third quarter of 2003. The lack of upgrades probably did help IBM sell iSeries boxes in that quarter, but the lack of upgrades from 7XX to 8XX models has hurt sales since then.

That's why IBM instituted a promotion last week aimed at Model 7XX and is giving decent trade-in rebates for upgrading to an iSeries Model 810 or Model 825 server running OS/400 Enterprise Edition. These are not traditional upgrades, where IBM protects the customer's depreciation schedule on an existing machine by preserving that machine's serial number after the upgrade. This is a push-pull deal, where a 7XX customer will acquire a Model 810 or Model 825 and then ship back the 7XX box to IBM. Big Blue will then do as it pleases with the 7XX box, perhaps reselling it through its Global Financing unit or putting in the metal recycling bin to keep it off the open market.

As you read elsewhere in this newsletter, last week IBM dropped prices substantially on the more powerful versions of the Model 810 server (price cuts were above 60 percent), and even the entry box (Model 810-2465) got a 9 percent discount. When you throw the 7XX upgrade promotion on top of these Model 810 price cuts, the effective price of a Model 810 for a 7XX shop is about half, compared with acquiring a Model 810 before April 20. (See comparative pricing table showing the economics of the price cuts and the trade-in promotion.) On the smaller Model 810 box, the discount and the rebate amounts to a 27 percent discount.

IBM did not cut prices on the Model 825 server, but it is offering a $50,000 trade-in credit to 7XX customers who trade up to a Model 825. This works out to a 15 percent discount off the acquisition costs.

Other discounts and deals can be combined with the 7XX to 8XX trade-in promotion, which will run until June 30. That is the end of IBM's second quarter, and it is also the date by which IBM has promised it will start shipping its Power5-based "Squadron" servers. They could, of course, ship earlier. Resellers and other business partners cannot upgrade their machines as part of this deal. It is intended for end user customers only. IBM is not offering trade-ins on Model 810 and Model 825 servers running OS/400 Standard Edition, and it similarly did not cut prices on any iSeries machines running Standard Edition on April 20.