UPDATE- Hitachi, IBM Call Tech Deal Quits

IBM Corp. and Hitachi Data Systems Corp. have quietly discontinued a technology agreement dating back to 1994 under which IBM sold CMOS chips for Hitachi's Pilot mainframes.

Starting in January 2000, Hitachi will develop its own CMOS chips and associated technology for its mainframes, a Hitachi executive said last week.

The move will have no negative impact on existing Hitachi customers, in terms of software compatibility or upgrade issues, insisted Chris Worrall, a vice president of server marketing for Hitachi. Instead, building its own mainframe CMOS technology will give Hitachi the opportunity to add differentiated value at the chip set level, Worrall said.

Also, Hitachi's agreement with IBM guarantees availability of the next generation of IBM CMOS mainframe chip sets to be announced later this year so there should be no short-term upgrade issues for users to worry about, Worrall said. He declined, however, to specify why the current agreement with IBM isn't being renewed.

Hitachi's Pilot mainframes are all-CMOS based systems like IBM's Generation 5 class mainframes. They are smaller than Hitachi's high-end Skyline mainframes, which feature a combination of CMOS and older water-cooled ECL technology.

An IBM spokesman also refused to elaborate on the reasons but said that one of the factors behind IBM's decision was the "extra cost" involved in building chips for Hitachi's Pilots. "It was not a significant source of revenues for us anyway... and that was offset by the cost of developing the chips for Hitachi," said IBM spokesman Tim Ohsann.

The development comes at a time when Hitachi has been under tremendous marketplace pressure from IBM. Hitachi's mainframe revenue dropped from US$1.6 billion in 1997 to around $750 million last year, while its market share of mainframe MIPS dropped from 21 percent to 14 percent, according to Impact IT, a consultancy in Mountain View, California.

With IBM set to dramatically increase the speed in its CMOS chips, Hitachi's challenge will be to match that speed with its own CMOS technology, said David Floyer, president of Impact IT. Skyline's hybrid technology may be an option, "but it is going to be very expensive" compared with CMOS, he said.

Desk edit by: Clare Haney

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