IBM pulls the plug on German mainframe venture
IBM (IBM) has decided not to proceed with its mainframe venture with T-Systems after the German antitrust agency made a critical comment about the venture. IBM was poised to pay $962 million to take certain mainframe-related operations and talents from T-Systems, according to a report from Reuters.
T-Systems is the information technology services division of Deutsche Telekom (DTEGY), the German telecom giant that also owns American mobile operator T-Mobile (TMUS). At the moment, T-Mobile is pushing to be allowed to merge with its rival Sprint (S), which is controlled by SoftBank (SFTBY).
Regulator says IBM dominates mainframe market
According to Germany’s antitrust agency, IBM already dominates the mainframe market in the European Economic Area and taking T-Systems’ operations as they had agreed would further tighten its grip on the market in a way that could stifle competition and hurt customers in the process.
Selling mainframe systems, which large organizations use to crunch massive volumes of data on site and quickly, is a major business for IBM. The global mainframe market was valued at $2.1 billion in 2017 and is projected to grow to $2.9 billion by 2025, according to Allied Market Research.
IBM’s revenue for the March quarter dropped 4.7% YoY to $18.7 billion, weighed down by weakness in the company’s cloud computing business, where sales fell 2.0% YoY. At Amazon, the world’s top cloud company, cloud sales rose 41% YoY, whereas Microsoft and Alibaba recorded a cloud revenue increase of 73% and 76% YoY, respectively, in the March quarter.