Re: RE: Prometheus

On 5/31/06, qsrvbas@xxxxxxxxxxxx <qsrvbas@xxxxxxxxxxxx> wrote:

-----Original Message-----

>   6. RE: Prometheus (Jon Paris)
>
> >> looks like a reliable report. p5 hardware brings in 3x that of i5
hardware.
>
> Maybe I should have said profits not revenue.  What the p series did for
>years was to follow the philosophy that if you lost a few $ on each
unit you
> sold you could make it up in volume!  It has been the profit margins on
the
> i Series that has kept the p afloat for years.

I can't dispute this. But _IF_ it's true and _IF_ the following are reasonably 
accurate:

>> 1st quarter 2006 sales:
>>  xSeries $954 million
>>  zSeries $555 million
>>  pSeries $733 million
>>  iSeries $237 million

...then it would _seem_ that our little niche is in FAR worse shape than many 
of us have thought.

We have $733M at one point with terrible profit margin. Let's say 2%. At the second 
point, we have $237M of which enough is "profit" to bouy up R/D across product 
lines. Yow! Must be at least 10% margin order to be significant, given the smaller 
starting amount of $237M vs. $733M. (I would suspect the profit relationship to be worse 
than that, but it doesn't matter.)

On the $237M side, we have boxes that are slightly more costly to manufacture, 
though virtual IOPs, etc., are probably narrowing the gap. And we have 
operating system, compilers, DB2, security, communications, etc., all of which 
must be tightly integrated and which can mostly be considered slightly more 
costly to design and create than it costs on the other side. (Not to mention 
efforts at including such goodies as PASE for no charge.)

So, with higher cost to produce AND higher margins, the ACTUAL sales of iSeries 
(measured in simple terms of number of systems) must be astoundingly lower than 
pSeries. I can't see ant other way to look at the disparity in dollar volume 
while also accounting for cost and profit.

The hardware can be reasonably similar, but let's say it costs $1.00 for System 
LP (low profit) and $1.10 for System BP (big profit). Say the same for related 
software.

Now, factor in the profit margins on LP and BP and tell me what that implies 
for number of units sold when LP sales revenue is triple+ of BP revenue. It 
looks relatively dismal to me... _IF_ the basic premise holds and the revenue 
figures are reasonable. A third of the sales dollars from a system that is more 
expensive to produce and also gives higher profits...? (And as the profits on 
System LP approach zero or negative...!)

Something isn't adding up.

I will cut to the conclusion and say the answer is to have i5/os as a
supported OS on the p5 and do away with i5 hardware models, i5 only
business partners, a lot of i5 marketing.  Use i5/OS just like AIX and
Linux is used on the p5. A vehicle to sell PowerPC hardware, DB2
licences, application software and IBM consulting services. At the the
local user's group the IBMers talk only i5. At Common is the p5 and
AIX discussed at all? Seems to me not informing about what the p5 has
to offer is a big missed opportunity to keep the i5 customers in the
IBM tent.  As we see with PHP running so well in PASE on the i5, i5
and p5 software have a lot in common. We know the hardware is just
about identical.

There are not many published numbers to know for sure, but I dont
agree the p5 is a low profit item for IBM.  The $4000 for the lowest
price p5 is still $4000. AIX, Linux and software subscription are in
the $1000 range. DB2 brings in a good profit at $724 for the first
user, $124 for additional users or $4874 per processor. Double those
charges for DB2 on the enterprise ( bigger than 2 cores ) models.

-Steve