IBM Offers Modest Discounts on i 525 and M25 Entry Boxes

June 23, 2008 Timothy Prickett Morgan

The second quarter must be working out alright for the i platform, if the relative dearth of deals from IBM is any indication. Maybe Big Blue, its resellers, and its customers all agree that the new Power 520, 550, and 570 machines are all priced pretty much where they need to be, so there is no need to wheel and deal. But, some customers always need a little sweetener, and that is why IBM announced a rebate deal on the new and older generations of entry i platforms.

The Power 520 Model M25 and System i Model 525 Express Introductory Rebate Promotion, as this deal is called, was actually announced on May 8 (a Thursday, not a traditional announcement day like Tuesday, and I never saw an announcement letter published for this) and updated on June 17. The update was to add $50 Canadian to two rebates, so the rebate promotion has not changed substantially since May 8. As the name suggests, the deal offers customers who buy a Power5+ System i 525 server or a Power6 Power System 520 M25 i Edition discounts. The discounts are steeper if you buy sooner, which means IBM and its partners are trying to clear out the channel, and are not available on i 515 or M15 machines, which means IBM is happy with the prices for these entry machines. Maybe customers are, maybe they are not.

The deal is available in both the United States and Canada, and like past deals, IBM is giving the rebates only after customers shell out a certain amount of cash, and the rebates are steeper if you act before the end of the second quarter (June 30, to be precise) than they are if you wait until the end of the third quarter (which ends on September 30 and is also when this deal expires). Here’s how it works:

If you are buying a Power 520 M25 machine, you have to spend at least $21,000 on your configuration and then activate i5/OS or i 6.1 on the second processor in the box (which costs $14,995) and spent another $7,500 adding an additional 30 users to the machine. That comes to a minimum single unit purchase price (Minimum SUPP in the IBM lingo) of $43,495. After you spend that dough, IBM will give you a rebate of 7 percent, which works out to $3,045. Presumably, if you add extra hardware to the box, you get 7 percent off that, too, but the announcement letter doesn’t say. It does say that if you have additional printers, tapes, external storage, and such on your acquisition invoice, only the hardware and software relating to the i system gets the rebate. Starting on July 1, the rebate drops to 3 percent, or $1,305. That is essentially noise in the data.

On the System i 525, which has slightly less performance and not as good price/performance, the deal is similar. It applies to i 525 machines with 30, 150, or unlimited users (that’s feature codes 7790, 7791, and 7792, respectively), and IBM is requiring the Minimum SUPP of $50,000, $75,000, and $95,000, respectively. That works out to quite a bit of cash: $3,500 on the 30-user system, the magical $5,250 on the 150-user machine, and $6,620 on the unlimited user box. After July 1, these rebates also drop to 3 percent of the Minimum SUPP.

Now, here’s where it gets mean. Canadian customers are being asked to buy heftier configurations. On the Power 520 M25 rebate, customers have to spend $53,100 Canadian, which works out to slightly more than that in U.S. dollars because the Canadian looney is worth a little bit more than the U.S. greenback thanks to all of that Canadian oil being imported into the States to the south. As we go to press on Friday, the Canadian dollar is worth $1.03 American, which means these Canadian i shops are being asked to pony up what amounts to $54,693. That’s 25.7 percent more dough to do the deal than is being asked for in the States. The disparity for the System i 525 machine is even larger, with customers buying the 30-user machine needing to spend at least $74,650 Canadian, those buying the 150-user system needing to spend $111,950, and those buying the unlimited user system needing to spend $141,800. That works out to a 53.7 percent higher Minimum SUPP when you factor in the minor effect of the exchange rate. This seems particularly unfair, especially considering the loyal base of Canadian manufacturers, distributors, and financial services companies who love the AS/400 and its progeny.

I guess you can see who has the stronger economy, eh?

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