IBM Offers Low Financing Rates for System i5 Upgrade Leases

Published: July 17, 2006

by Timothy Prickett Morgan

While IBM has been gradually ratcheting up interest rates on its Low Rate Financing deals offered through Big Blue's Global Financing unit for the past year, in concert with the interest rate rises put in place by the Federal Reserve and the commercial banks that lend to companies and consumers, the System i5 business is under a little pressure to perform. Cheaper financing is one of the ways that midrange shops can be enticed to buy servers when they might otherwise choose to hold off.

And that is why the Global Financing unit is now offering relatively low financing rates to customers who have an iSeries machine on lease and who upgrade to a System i5 machine and extend their leases. And, because IBM wants to pump up sales in the third quarter (and is possibly anticipating more interest rates increases by the Federal Reserve), the financing rates are lower in the third quarter (which for all intents and purposes started last week) than they will be in the fourth quarter, which begins on October 1.

Specifically, under the "Get More, Pay Less" offer, IBM is providing 2.99 percent financing in the third quarter in the United States and 2.4 percent financing in Canada; in the fourth quarter, these rates go up to 3.49 percent in the United States and 2.9 percent in Canada. These terms are available to customers who are rated as Best Plus using Global Financing's credit rating system (which, as I have jokingly said before means that it is the credit rating for borrowers who are financially secure enough that they don't actually need to borrow money). Customers have to extend their leases on the resulting System i5 machine by 36 months with a $1 (U.S. or Canadian, depending on where the deal is done) end-of-lease purchase option. The upgrade parts of a new machine (if it is a push-pull upgrade) have to ship by September 30 to get the 3Q financing rate, which means it will get booked in the third quarter. The 4Q financing rate will apply to any machine shipped after October 1; machines have to ship before December 31 under this deal.

The deal applies to specific machines under lease by Global Financing, and customers have to upgrade to specific models to take part in the deal. Customers with iSeries 810 boxes can convert to an i5 520, 550, or 570; customers with an iSeries 825 can convert to an i5 550, 570, or 595; and customers with iSeries 870 or 890 machines can convert to i5 570 or 595 machines. The deal does not apply to first-generation iSeries machines in the 9406 class (820, 830, and 840 boxes), nor does it apply to the deskside iSeries 270 machines. But, if you have such a machine under lease with IBM, I am sure Big Blue will be willing to make a deal.