Amdahl plans to exit mainframe business

And then there was one.

Amdahl has confirmed that it plans to exit the mainframe market. The move shocked some users and led analysts to warn that IBM will have more freedom to hold the line on prices for its big-iron S/390 systems now that its two plug-compatible rivals are largely exiting the scene.

Amdahl's move comes seven months after Hitachi Data Systems said it was scaling back its mainframe efforts and halting sales to new customers. Amdahl said it's doing the same thing because the investment required to stay competitive with IBM's new 64-bit Z-Series mainframes just wasn't worth the projected returns.

As a result, the subsidiary of Tokyo-based Fujitsu Ltd doesn't plan to extend its current line of 31-bit S/390-compatible systems, said Amdahl vice president Carol Stone. Amdahl will cease making those machines in March 2002, she said, although the company will continue to support its installed base of users for another five years after stopping production.

"IBM's [64-bit] architecture is very proprietary and requires a significant investment" to emulate, Stone said. With mainframe sales projected to dwindle during the next few years, and demand for 64-bit S/390 machines likely to remain low for the near future, the investment looked unappealing to Amdahl from a business perspective, she added.

Instead, Amdahl plans to focus all its hardware investments on Fujitsu-branded Unix systems based on Sun Microsystems' UltraSparc microprocessors. "We decided the smartest business decision for us would be to direct our investments to the open systems market," Stone said.

Carl Greiner, an analyst at Meta Group, said the net growth of installed mainframe capacity has dropped from more than 33 per cent two years ago to just over 18 per cent last year. But with IBM's competition getting out of the market, Greiner had this advice for users: "Don't expect to see the 30 to-35 per cent price and performance gains that we've been seeing annually" in recent years.

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