IBM’s Mainframe Ambition Suffers a Blow

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).

IBM’s Mainframe Ambition Suffers a Blow

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.