IBM Offers Trade-In Deal for Model 270 Shops

by Timothy Prickett Morgan

Halloween has come and gone, and the holiday season and pressure among IT vendors to boost sales in the fourth quarter are fast approaching. For several months, IBM has been running a trade-in promotion to get OS/400 shops running an AS/400 Model 7XX to upgrade to either iSeries or i5 servers, and on Friday the company launched a similar trade-in deal for customers using entry Model 270 servers that date from the same "Northstar" PowerPC AS/400 generation.

To take part in this deal, you have to act fast. You have to acquire a new iSeries Model 810, 825, 870, or 890 server running OS/400 Enterprise Edition, or an eServer i5 Model 520, 550, or 570 server running OS/400 Enterprise Edition; and the machine must be installed by December 31. IBM can then book the sale of the machine in the fourth quarter of 2004. The trade-in credits are not discounts, which allows IBM to book the full amount of the sale and then offset it in another way, as customers apply the trade-in credit toward the acquisition of other goods and services. A different IBM division might then take the hit on this deal. As part of the Model 270 deal, you also have to give IBM the Model 270 that you are replacing. This way the company can keep the machines out of the used equipment market, where they can compete against new iSeries or i5 gear.

The trade-ins vary according to the Model 270 you have; they range from $2,000, on a Model 270 with processor feature 2248 and interactive feature 1517, to $17,500, on a Model 270 with processor features 2253 or 2434 with interactive feature 1520. IBM says the trade-ins are based on the fair market value of the Model 270 gear, plus an additional and unspecified incentive. Considering that IBM's Global Services unit basically controls the price of second-hand iSeries equipment (since it controls the vast majority of the supply of machines), it is hard to say what those used Model 270 prices are (IBM doesn't publish full second-hand iSeries price lists) and exactly how fair they are.

The Model 270 trade-in deal, like the Model 7XX trade-in deal, has plenty of restrictions. (You can see the trade-ins and restrictions in this table.) IBM says that this Model 270 trade-in deal can be combined with leasing and financing offers from Global Services as well as other IBM discounts, rebates, and promotions.

For the Model 7XX trade-in deal, which we covered in August, credits range from $600 to $48,000. IBM is clearly being a bit more generous to Model 270 buyers than to those buying small Model 720s and 730s.

But whether this generosity will get Model 270 shops to part with their aging but reliable servers remains to be seen. Many customers have long-since paid for their boxes, and in this stagnant economy, it's hard to convince customers to spend money if they don't have to. But customers who leased a Model 270 three, four, or five years ago would probably not renew their lease if they could get a more modern iSeries or i5 box for about the same cost, and take advantage of their new features.