The Four Hundred

As we reported last week, IBM is offering two iSeries machines at half price in an effort to boost sales of the platform to the green-screen faithful who have resisted upgrading through several generations of AS/400 and iSeries servers. IBM announced the details of the "Green Streak" promotion last week, and it is more or less exactly what our sources said it would be: a 50 percent discount on iSeries hardware and deep discounts on iSeries software and Software Subscription licenses.

With iSeries sales down 26 percent in the second quarter, the managers of the MidMarket Server Division, which controls the iSeries line, are under intense pressure to go back to the AS/400 installed base, which is using hundreds of thousands of vintage AS/400 servers, to buy a modern iSeries machine. Most of these customers have fairly modest processing needs, so IBM is only offering the discounts on two specific iSeries models, and only to customers who place orders by December 13 and take delivery of the machines by December 31. This timeline will allow IBM to book sales in the third and fourth quarters, and perhaps pull deals from next year into late 2002, as deals sometimes do. But, more important, this deal may get companies that were not planning to spend to start doing it.

The Green Streak promotion, as we said last week, gives a 50 percent discount off two iSeries configurations. What we didn't know last week is that the discount is also available for selected upgrades from specific AS/400 and iSeries models to these two Green Streak configurations. IBM is offering a 50 percent discount on the iSeries Model 270-2432 with the 1519 interactive feature card installed. Before the discount, that Model 270 machine had a list price of $67,000 and includes a 540 MHz S-Star processor with 2 MB of L2 cache memory, 256 MB of memory (expandable to 8 GB), and a 17.54 GB disk drive; this server is rated at 1,070 CPWs of raw power and has 50 CPWs of interactive power activated. The Green Streak deal also applies to the iSeries Model 820-2436 with the 1519 interactive feature card installed. The Model 820 machine has a 600 MHz S-Star processor with 2 MB of L2 cache, 256 MB of memory (expandable to 16 GB), and a 17.54 GB disk drive. Before the Green Streak deal, this Model 820 server had a list price of $105,000. The Model 820 under the deal is rated at 1,100 CPWs of raw power and has 70 CPWs activated for green-screen workloads.

The hardware discount is also available on upgrades from Model 270-2248 and 270-2431 servers to the Model 270-2432 machine. Upgrades to the Model 820-2436 server from Model 720-2061, 720-2062, 720-2063, 820-2395, and 820-2435 servers can also take part in the Green Streak deal. Upgrades from prior generations of AS/400 are not eligible, mainly because direct upgrades to the iSeries models from vintage AS/400s are not available. IBM doesn't want your old AS/400 in trade; it just wants you to buy new iron, to support your existing workloads and, hopefully, to give you a taste for modern applications once you buy into the iSeries.

In addition to the 50 percent discount on iSeries hardware, IBM is offering a 38 percent discount on selected iSeries software licenses and Software Subscription software maintenance fees to those who close their Green Streak deals fast enough to install a machine by the end of the third quarter (September 30). IBM is offering the discount on one-year and three-year prepaid Software Subscription contracts. Customers who buy and take delivery of the machine in the fourth quarter (between October 1 and December 31) will receive a 32 percent price break on iSeries software and Software Subscription fees. (The hardware discounts stay at the 50 percent level until December 13.) Software licenses and Software Subscription services must be acquired at the same time as the Green Streak server to get these discounts; you can't get one and then the others. The software discounts are being offered on the following OS/400 systems programs and tools:

Although IBM hasn't said so, prices on these two iSeries machine will presumably revert to their normal levels after December 13--unless IBM makes across-the-board price cuts, if the iSeries market turns out to be more elastic and price-sensitive than the company seems to believe it is. Hopefully, the increased volume of iSeries machines IBM pushes out in the third and fourth quarters will make up for the price cuts and stabilize iSeries sales. IBM's chief financial officer, John Joyce, says that IBM is now, like many IT companies and analysts, less optimistic about a recovery in the second half of the year than it was 90 days ago, and IT spending is widely expected to lag any recovery because of the excess server and storage capacity that many companies bought during the dot-com binge, and because companies that do need more capacity are nonetheless hesitant to spend money on anything that isn't absolutely necessary right now. IBM already chopped memory and disk prices on these machines on April 29 (and for many other machines in the iSeries line, but not across the entire line). The question now is whether the discounts will be large enough to overcome fear. We'll know in a few quarters for sure.

Kim Stevenson, vice president of marketing at the MidMarket Server Division, will host an iSeries Nation chat on the Green Streak deal at 11:00 a.m. Eastern on July 23. You can register online or by phone, at 800-289-0579; the confirmation number for the chat is 265719.

Incidentally, IBM has withdrawn the special rebates it was giving on the two iSeries Model 270s that were preconfigured with its WebSphere software, the so-called WebSphere Bumblebees, which debuted earlier this year. IBM has also withdrawn the iSeries Enterprise and e-business Application rebate, an on-again, off-again deal that has been around for years, that IBM uses to give price breaks to OS/400 customers when they buy hardware and application software together. The Green Streak deal effectively replaces these promotions and gives a bigger discount, anyway.