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IBM Quashes Oracle's SPARC Claims

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Reportedly, International Business Machines (IBM - Free Report) has retorted to Oracle’s (ORCL - Free Report) claim that the recently-launched SPARC servers (powered by T5 and M5 chips) are much faster and cheaper (delivers 5 times to 12 times better cost performance) than IBM Power servers.

IBM challenged Oracle’s findings and said that the comparisons were primarily made with older systems (3 to 5 year old systems according to Business Insider). Hence, the data does not reflect the current performance of the systems. Oracle had cited data from Standard Performance Evaluation Corporation (“SPEC”) and Transaction Processing Performance Council (“TPC”) to validate its claims.

Moreover, IBM also quashed Oracle’s claim that its new T5-8 server, priced at $270K, is much faster than IBM’s P780, which costs approximately $1.9 million. IBM said that the systems were not comparable and for a similar type of setup, its price range is equivalent to Oracle’s recent releases.

IBM and Oracle are traditional rivals. The competition intensified after Oracle entered the hardware market in 2010. The relationship took an ugly turn in 2012, when IBM forced Oracle to pull advertisements that claimed superiority of its Exadata products over IBM systems.

The recent spat reflects escalating rivalry between the two global giants as Oracle continues to search for ways to boost its sagging hardware business. Oracle’s recent releases target IBM’s dominant position (more than 50% market share) in the high-end UNIX server market.

On the other hand, IBM is trying to consolidate its market share through frequent updates, which will help it to expand its customer base. In its fourth quarter conference call (Jan 23, 2013), IBM claimed that it gained significant business from erstwhile Oracle and Hewlett-Packard (HPQ - Free Report) customers in 2012 (approximately $1.0 billion).

Despite these aggressive strategies, we note that both IBM and Oracle continue to lose revenues in the hardware segment. This is primarily due to lower enterprise spending,- as well as shrinking market for UNIX-based servers, which face significant competition from X86 servers. The upcoming launch of Intel’s (INTC - Free Report) Haswell processor is further expected to hurt their competitive positions in the near term.

Currently, both IBM and Oracle carry a Zacks Rank #3 (Hold).

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