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IBM To Unveil Successor To World’s Most Popular Commercial Computer

June 16, 1988

NEW YORK (AP) _ International Business Machines Corp. will offer up to 50 percent more bang for the buck next week when it announces a new generation of computers for the vital center of its product line, a new report says.

The introduction Tuesday of the new mid-sized computers will be ″one of the most important in IBM’s history,″ Dataquest Inc., a San Jose, Calif.- based market researcher, predicted Wednesday.

IBM is locked in a struggle with archrival Digital Equipment Corp. for domination of the middle range of computing, and both companies have been rushing products to market.

The new family of computers will succeed IBM’s System 36 and System 38, which are the world’s biggest-selling computers above the ranks of personal computers.

The existing machines are the workhorses for thousands of small and medium- sized businesses. They also are used as departmental computers in some big corporations, a niche where Digital has done especially well.

Although the rivalry constantly is see-sawing, ″We expect this announcement to radically alter the balance in the mid-range″ in IBM’s favor, Dataquest analyst Allan Baumgartner said.

The new computers have been code-named Silverlake and Olympia and will be unveiled as the AS-200 and AS-400 series, ranging in price from $30,000 to more than $300,000, Dataquest says.

While the System 36 and System 38 are distinct machines that run different software, the new computers all will run the same software, although some older programs will have to be modified to run on them, analysts say.

There are already nearly 300,000 members of the System 36-38 family installed worldwide, and over the next five years the new computers could raise the total to 700,000 systems with a value of more than $50 billion, Dataquest said.

IBM’s share of worldwide mid-sized computer shipments by U.S.-based companies slid to 23.6 percent in 1987 from 27.2 percent in 1984, while Digital’s rose over the same period to 18.9 percent from 15.2 percent, according to International Data Corp.

Each percentage point represents nearly $300 million in annual sales, so the battle for market share is intensely fought.

″It will be probably the broadest announcement that IBM has ever attempted,″ in terms of the number of customers who will be affected, said Robert Djurdjevic, an IBM watcher who is president of Annex Research Inc. in Phoenix, Ariz.

″The big news is that IBM is going to make the mid-range market exciting again, win or lose,″ said Donald Bellomy, an analyst for International Data Corp. in Framingham, Mass.

″If Silverlake doesn’t take back some market share, then it will be a failure,″ Bellomy said.

Digital and other computer companies are hoping to pick off some IBM customers during the transition by convincing them to switch to their products instead of trading up to the new IBM computer.

″If a customer’s running out of capacity, they’d be doing their corporation a disservice not to look at Vax,″ Digital’s product line, Gary Hoppe, Digital’s manager of U.S. sales consultants, said in an interview.

The competitors’ job will be easier if it is expensive and difficult to move software from the old computers to the new ones.IBM has promised that the new line will protect ″nearly all″ of customers’ investments in applications software, but it has not been more specific.

IBM should be able to hang onto customers as long as it has done a respectable job of providing continuity to the new products, Annex Research’s Djurdjevic predicted.

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