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Business Mirror

Sunday
Nov 22nd
IBM mainframes face scrutiny from Justice department PDF Print E-mail
Technology
Monday, 12 October 2009 19:28

INTERNATIONAL Business Machines Corp.’s mainframe-computer business faces a review from the US Justice Department over whether it excludes competitors, according to a trade group.

The Computer and Communications Industry Association sent a report to the Justice Department in September, saying IBM is exploiting its monopoly in operating systems for mainframes, said Ed Black, the group’s chief executive officer. Some of the organization’s members, including IBM rivals, have been contacted by the Justice Department, he said.

IBM, the world’s largest computer-services company, began developing mainframe computers in the 1940s and ‘50s and is now among the few companies offering the systems. IBM has stifled competition by withholding licenses to run its operating system on rival hardware, the CCIA said.

“Our goal was to educate the DOJ about why we think there’s a monopoly maintenance case,” Black said. “Our hope was they would open an investigation.”

Once the dominant form of computers, mainframes are still used by large organizations, such as banks, insurance companies and government agencies, where thousands of people need to access different kinds of information at the same time.

IBM had 85 percent of the $6.5 billion mainframe-hardware market last year, according to market researcher Gartner Inc., of Stamford, Connecticut.

T3 Technologies Inc., a company that builds mainframe computers and is mentioned in the CCIA’s report, complained to the European Commission this year that IBM shut out competitors by offering its mainframe operating systems only with IBM hardware.

“For decades IBM licensed its operating system to all comers,” Steven Friedman, president of T3, said in an interview. “In 2006, IBM said they would license their operating system only on their hardware platform. Without that software, the hardware we sold was no better than a piece of furniture.”

T3 also filed an antitrust claim against IBM in the US, according to a January statement. IBM said the U.S. claim was dismissed last week. T3, based in Tampa, Florida, has appealed the ruling.

“We understand the Department of Justice has asked T3 for documents from the litigation,” Edward Barbini, an IBM spokesman, said Friday in a statement. “IBM intends to cooperate with any inquiries from the Department of Justice. We continue to believe there is no merit to T3’s claims, and that IBM is fully entitled to enforce our intellectual property rights and protect the investments that we have made in our technologies.”

Gina Talamona, a spokeswoman for the Justice Department, declined to comment in an e-mailed response to queries on the case.

The European Commission’s investigation into IBM continues and officials are in contact with the Department of Justice, Jonathan Todd, a commission spokesman, said today in an e-mail. IBM, based in Armonk, New York, fell 49 cents to $122.29 at 4 p.m. in New York Stock Exchange composite trading. The shares have advanced 45 percent this year.

The investigation was reported Friday by the New York Times.

The CCIA released a summary of its report, which includes complaints by companies that say they have been harmed by IBM’s behavior, Black said. The group’s members include Google Inc., EBay Inc., Microsoft Corp. and Oracle Corp. IBM has been the subject of antitrust scrutiny in the past, including an investigation that lasted more than a decade. The government abandoned that case in 1982.

The government did issue a consent decree in 1956 that cited IBM for anticompetitive practices. The decree ended in the 1990s.

“All the competitors in the mainframe space really died out about a decade ago,” said Rob Enderle, an analyst with Enderle Group in San Jose, California. “The oversight would have gone away when the consent decree was lifted. IBM is the last one standing, so they clearly are as much a monopoly as they were before.” (Bloomberg)