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Volume 13, Number 35 -- August 30, 2004

But Wait, There's More

IBM Offers Trade-In Deal for 7XX Gear

With the second quarter hammered by the impending transition to the eServer i5 Power5-based servers, IBM has to do something to get customers to upgrade to at least a more recent iSeries or i5 machine in order to boost sales during the remainder of the year. In a reprise of a similar deal that it has used over the years, the company has announced the AS/400 7XX Trade-In Promotion.

Under this promotion, IBM has determined the fair market value of a given Model 7XX server, based on AS/400 takeout prices from IBM's Global Financing unit for 7XX machines with specific processor and interactive feature cards. Then IBM says that it is throwing in an "additional incentive" on top of this market value.

While the promotion runs until December 31. Those who act before the end of the third quarter (September 30) get higher trade-in credits than those who wait until the fourth quarter. For those who buy before September 30, the credits range from $1,000 on entry Model 720s to $80,000 on the biggest Model 740s. The trade-in credits range from $600 to $48,000 for those who buy between October 1 and December 31. The trade-in credit is not a discount, which means IBM can book the full sale for the iSeries or i5 machine customers buy and offset it in another way as customers apply the trade-in credit toward the acquisition of other goods and services. There are loads of restrictions (see table outlining this deal). Customers can buy iSeries Model 810, 825, 870, or 890 servers running OS/400 or i5/OS Enterprise Edition, or buy i5 Model 520 or 570 servers running i5/OS Enterprise Edition.

While anything to lessen the cost of an iSeries or i5 acquisition is a good thing, IBM looks a bit stingy, especially on the low-end Model 720 machines. These machines may have lost a lot of their economic value in recent years, as several generations of OS/400 servers have been launched, but, thanks to the reliability of IBM's hardware and the binary compatibility of its software, they can still be useful for running RPG and COBOL applications in green-screen mode. Getting customers to part with vintage 7XX models is not necessarily going to be easy.

IBM Gives Rebates with iSeries Security Deal

IBM must still have some iSeries Model 810s left in the barn. The company has announced a rebate promotion for Model 810 buyers that acquire a specific Model 810 configuration and cryptographic software in conjunction with their OS/400 license. Under this "Security Offering for eServer" rebate, which expires on January 15, 2005, customers that buy a Model 810 with processor feature 2466 (rated at 1,020 CPWs), OS/400, the Cryptographic Access Provider program (which provides 128-bit SSL encryption for the integrated Web server in OS/400), and a year of Software Maintenance for the box can get a $3,400 rebate, which amounts to a 28 percent discount on the cost of the base Model 810 server, which costs $12,000 in a bare-bones configuration. It is unclear what the Cryptographic Access Provider software costs, but it is bundled in for free with eServer i5 Model 520 Express configurations, and Model 810 customers should demand the same treatment if they are buying a new machine.

The iSeries Wins VAR Award for Sixth Straight Year

Is it any wonder that the easy-to-use, indisputably secure, and handsomely outfitted IBM eServer iSeries is the darling of the value-added reseller (VAR) crowd? At this point it certainly shouldn't be to VAR Business magazine, which this month crowned the iSeries as the king of the midrange servers for the sixth straight year as part of its Annual Report Card awards. The OS/400 server once again demonstrated why legions of loyal VARs and users consider it to be the pre-eminent box on which to base one's midrange business (only 99 to 999 employees, please) by besting similar (okay, only "remotely comparable") offerings from Hewlett-Packard, Sun Microsystems, and even its fraternal twin, the pSeries, across a series of categories. The IBM Rochester product once again swept all three subcategories in the midrange server contest, which includes product innovation, support, and partnership (although we'd be surprised if it won the "marketing support" line item in the support subcategory, in which it historically fares poorly, for some strange reason). The 2004 award results are based on a survey of about 5,000 solution providers conducted by two market research firms for VAR Business. IBM won a bunch of other hardware awards, including the xSeries (entry level servers), the ThinkPad (mobile computing), and ThinkCentre and IntelliStation (advanced desktops and workstations).

HP Reseller Gobbles Up IBM Reseller

The consolidation of the value-added reseller (VAR) channel continued last week, when one of Hewlett-Packard's top Unix server resellers acquired one of IBM's top-ten business partners. Logicalis spent $90 million to purchase Solution Technology, an Indianapolis provider of iSeries, xSeries, and pSeries servers and services. Logicalis, which has its U.S. headquarters in Bloomfield Hills, Michigan, pledges to provide the same representation of IBM and HP products following the Solution Technology acquisition, and plans to operate Solution Technology as a subsidiary for the rest of 2004. In 2005, Solution Technology will be integrated with Logicalis, but two divisions will be established for HP and IBM sales and technical support.

This difficulty of melding these opposing forces will be quelled somewhat by the fact that both Logicalis and Solution Technology buy from Arrow Electronics, the $8.7 billion Colorado computer distributor, and Logicalis will be able to maintain relationships with Arrow's IBM-focused division, called Support Net, and its HP-focused SBM division.

"Our acquisition of STI quickly takes us to a whole new level in our IBM sales and service capabilities, while our pending acquisition of an HP solution provider underscores our ongoing commitment and dedication to HP as well," said Mike Cox, Logicalis CEO. Logicalis expects minimal staff reductions as a result of the acquisition, somewhere on the order of eight to 10 people over the next two to three months, and plans to keep Solution Technology's solution partners, which include two OS/400 software developers, DataMirror and Logility, with the organization. Solution Technology's consulting subsidiary, Mindgent, is not part of the acquisition and will remain as an independent company. Logicalis, which has its corporate headquarters in England, despite the fact that $300 million of its total revenue of $400 million came from the North America last year, is a division of Datatec, a $2 billion, publicly traded company from South Africa.

TrailBlazer Bought by B2B Service Provider nuBridges

TrailBlazer Systems, a provider of OS/400-based EDI and B2B software, has been acquired by e-business service provider nuBridges, it was announced last week. TrailBlazer's flagship OS/400 offering, ZMOD Exchange, enables companies to share data with their business partners using a variety of different industry standards, including EDI, AS2 (EDI over the Internet), UCCnet, FTP, HTTP, XML, and Sockets. The company also offered AS2 and FTP software for Windows and a PGP encryption solution for both Windows and OS/400. Founded in October 2000, nuBridges sells access to its hosted e-business offering, enabling companies to securely send and receive business data at a lower cost than what traditional EDI value-added network (VAN) providers charge, the company claims. TrailBlazer's "capabilities fit perfectly within our eBusiness Community Management offerings," said Wain Kellum, who joined nuBridges as its president and CEO earlier this year. Richard Brown, TrailBlazer co-founder, said he is excited to join nuBridges. "We believe our combined organization allows us to offer customers tighter connections, more seamless integration, and easier execution for their e-business initiatives," he said. TrailBlazer provides nuBridges, which is privately held and backed by seven venture capital firms, with its ZMOD Exchange software, but, more important, it provides more than 2,000 customers. Both companies are headquarters in Atlanta, and nuBridges says it will hire all TrailBlazer employees. Other terms of the acquisition were not disclosed.

IBM Announces Venetica Acquisition to Boost DB2 Information Integrator

IBM plans to acquire data integration software provider Venetica, it announced last week. The Charlotte, North Carolina, company develops a product called VeniceBridge, which allows content management and workflow systems to access documents, images, reports, and other unstructured data spread across any number of different data repositories. The problem of multiple data repositories might be bigger than you thought. Venetica cites a Forrester Research report that says 75 percent of companies use data repositories from two or more vendors, and that 25 percent of companies use more than 15 different repositories. Venetica says that IBM will integrate VeniceBridge with its DB2 Information Integrator product, which runs on AIX, HP-UX, Solaris, Linux, and Windows servers and can access data stores on iSeries. The acquisition is expected to close in the fourth quarter. Financial details were not disclosed.

DataMirror Profits Up 300% on Sale of IDION Shares

DataMirror's GAAP net income surged 302 percent last quarter as a result of the sale of shares it held in IDION Technology, the parent of DataMirror's rival Vision Solutions. In May, DataMirror ended its hostile takeover bid of IDION, which it started in 2002, when it sold about 48 million shares of IDION (about 42 percent of outstanding shares) for about $20 million (Canadian). With the profit from that stock deal, DataMirror's net income for its second quarter (ending July 31) of fiscal year 2005 was about $6 million, or $0.54 per share, compared with net income of $1.5 million, or $0.13 per share, for its second quarter last year.

While total revenue for the quarter dropped 6.6 percent, from $14.2 million to $13.3 million, its license revenue increased by 12 percent year-over-year, largely due to a pick up in sales of its LiveAudit and iSeries resiliency offerings, says DataMirror CEO Nigel Stokes. "Business improved in the second quarter," said Stokes, who added that the company reduced its costs by $600,000 during the quarter and expects to save more over the course of the year. Despite the cost-cutting, the Toronto, Ontario, company doesn't expect to post profits like it did this quarter again anytime soon, and guidance offered by the company pegs third-quarter GAAP profits in the three- to eight-cent range. DataMirror's stock, which is traded on both the Nasdaq and the Toronto stock exchanges, was down slightly, about four percent, after the announcement of its second quarter financials.

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Editor: Timothy Prickett Morgan
Managing Editor: Shannon Pastore
Contributing Editors: Dan Burger, Joe Hertvik, Kevin Vandever,
Shannon O'Donnell, Victor Rozek, Hesh Wiener, Alex Woodie
Publisher and Advertising Director: Jenny Thomas
Advertising Sales Representative: Kim Reed
Contact the Editors: To contact anyone on the IT Jungle Team
Go to our contacts page and send us a message.


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