International Business Machines Corp. (IBM) announced the availability of world’s fastest microprocessor that will begin shipping to customers from Sep 10, 2010.
The z196 processor is a four-core chip that contains 1.4 billion transistors on a 512-square milimeter (mm) surface. The chip was manufactured by using 45 nanometer (nm) silicon on insulator (SOI) processor technologies.
The microprocessor chip can pick up speeds of up to 5.2 gigahertz, which means the chip's controlling clock can tick out 5.2 billion pulses per second to keep data moving around the microscopic channels in the chip.
The mainframe processor uses embedded DRAM (eDRAM) technology, which allows IBM to place dense DRAM caches, or components, on the same chips as high-speed microprocessors, resulting in improved performance.
With the increasing complexities associated with day to day business activities, there is a growing need to maintain enormous workloads and massive data, as number of transactions on a daily basis improves rapidly.
According to the research firm, Berg Insight, the number of active users of mobile banking and related financial services worldwide is estimated to increase from 55 million in 2009 to 894 million in 2015. This massive increase is expected to put huge pressure on existing systems.
Going forward, large organizations such as banks and retailers will need systems capable of fetching huge amount of data from storage and processing them within a very short span of time. Moreover, the system needs to be reliable and cost effective at the same time.
IBM remains committed in solving these problems and has made significant investment in systems by delivering workload-optimized systems with innovation in microprocessors, software and hardware.
The z196 processor is a result of this continuous investment, with IBM spending more than $1.5 billion in research and development, taking approximately 3 years of time to develop.
IBM’s SOI technology involves a key component called an avalanche photodetector, which converts light into electricity. IBM used silicon and a material called germanium to create an avalanche photodetector that is among the fastest but consumes less electricity.
The zEnterprise system is the most powerful mainframe system capable of delivering superior performance. The core server contains 96 powerful processors, capable of processing 50 billion instructions per second. The system also has new software that can deliver 60% improvement in dealing with data intensive Java workloads.
The system offers 60.0% more capacity than its predecessor system z10, utilising same amount of electricity. zEnterprise is cost effective as it improves software performance, thereby reducing software licensing cost.
IBM’s current System z is a strong driver of IBM's greater than 50% revenue share in the high-end server segment, according to research firm IDC. We expect client migration from System z to zEnterprise to drive top-line growth over the long term.
We believe this is a significant innovation from IBM as it is expected to improve IBM’s customer base, primarily large banks and retailers throughout the world who are required to manage huge database and provide real time services. Approximately, 50 of the world’s top global banks depend on IBM mainframes to run some of the most sophisticated transactions on the planet.
IBM, which faces stiff competition from Hewlett Packard Co. (HPQ) in the mainframe market, is expected to gain market share with the help of the new zEnterprise system, in our view.
Recommendation
For the long term, we remain positive on IBM’s high-margin recurring revenue business, new contract wins, strong portfolio of products and solutions, global expansion, increased dividend payouts and share repurchases. However, IBM faces stiff competition from Hewlett Packard, Accenture Plc. (ACN), Oracle Corporation (ORCL), VMware Inc. (VMW), Google Inc. (GOOG) and Microsoft Corporation (MSFT) in most of its markets.
IBM has a Zacks #3 Rank, which implies a Hold rating on a short-term basis (1–3 months), while on a long-term basis (6+ months) the company has a Neutral rating.
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