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IBM whittles x64 iron prices

Chips are down, and servers too

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IBM's x64 server business took it on the chin pretty hard in Q4, and today, it formally price cuts for companies who buy direct from Big Blue. The price cuts are probably not an indication of the discounting levels that big enterprises get, but they do show that IBM understands it must compete on price as well as features if it wants to chase the SMB customer.

This is a lesson IBM never did learn with its PC business, which is now owned by Lenovo, and now that Bob Moffatt, a former PC general manager and then supply chain expert taking charge of the company's Systems and Technology Group, you can bet IBM is wondering why it's in the x64 server business at all. If you drink the Blue koolaid, Power and mainframe machines are obviously better than x64 iron.

Mark Loughridge, IBM's chief financial officer, shrugged off a 32 per cent decline in sales of its System x server line when the company reported its fourth quarter financial results last week. "This reflects a significant slowdown in the x86 market, as customers are virtualizing and consolidating workloads into more efficient platforms such as Power and mainframe," Loughridge said. "So as you look at these results, you can see that the industry standard hardware is clearly more susceptible to an economic downturn."

Maybe some people believe this is what's going on with IBM's x64 business, but I am not one of them. (I went through what I think might be going on in the above story covering IBM's Q4, but it's my guess that IBM stuffed its channel in Q2 and Q3 and that it's also suffering from some server virtualization heartburn). Chip makers Intel and Advanced Micro Devices have been slammed by the economic meltdown, which we have covered here at El Reg in detail, and it's no wonder that IBM has taken some hits too. It will be interesting to see how Hewlett-Packard and Dell do when they report their numbers.

Anyway, to help goose its sales, those shopping on IBM's online store can get a 7 per cent discount on various configurations of the x3350, which is a single-socket, rack-mounted server based on Intel's quad-core Xeon processor. IBM is also giving 15 per cent off on its HS12 Xeon-based two-socket blades for its BladeCenter chassis and 13 per cent off the two-socket, Opteron-based LS22 blade. The four-socket x3755 server, which uses quad-core Opterons, gets a 20 per cent discount.

If IBM did indeed stuff its channels last year, resellers looking to get rid of inventory will no doubt beat these discounts, even on onesies to small customers. Or they will toss in other freebie stuff that makes the numbers work out to a bigger discount on the server. These online discounts are best thought of as the beginning of a negotiation. ®

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