Amdahl has announced it is discontinuing all R&D in its S/390-compatible mainframes, and will stop selling them at the end of parent company Fujitsu's next financial year, in March 2002.
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Until then, the company will continue to offer its current 32-bit Millennium 2000C and 2000E systems, while support for all current models will continue for a further five years to March 2007.
The timing of the announcement, if not the substance, came as a surprise to Amdahl employees. It follows the appointment of new chief executive Yasushi Tajiri in October. No sooner had Tajiri sat at his desk than IBM launched the zSeries, and this prompted the review of the substantial investment needed to develop a rival version.
Amdahl's European marketing manager Tony Whalley said, "The 64-bit architecture requires a fair amount of R&D, and we would not get a large amount of benefit back for two to three years. Most of the business is in the open systems market."
Amdahl has, in fact, already invested a significant amount in producing a 64-bit competitor for the zSeries, and has been telling customers the product would be released at the end of next year. There are over 200 engineers working on mainframes at the company's California headquarters. Amdahl is currently working out what to do with them.
Fujitsu has estimated the cost of the withdrawal, officially described as a restructuring, at over $500m (£330m). The decision has forced the Japanese electronics giant to downgrade its profit forecast for the financial year to March 2001 by more than a half.
Amdahl's decision is not only very costly but is also an abandonment of the company's heritage. It started life as a mainframe supplier back in 1974 and was gaining 80% of its sales revenue from mainframe hardware as recently as 1992. Last year, however, mainframe business only accounted for about 10% of total revenue and the company has gained more revenue from reselling Sun's E10000 servers.
Amdahl is not saying what its mainframe revenue has been this year. Overall the market has been very sluggish, and IBM has reported falling sales for five consecutive quarters. This undoubtedly influenced Amdahl's decision.
Whalley explained, "New applications are going on Unix and NT platforms. This does cause an increase in capacity on the S/390 side in some cases, but it's an indirect capacity push".
Amdahl's decision follows the withdrawal of Hitachi and Comparex from the IBM-compatible mainframe market in March, and leaves IBM as the only supplier in a market that was fiercely competitive when Amdahl arrived, a year before Microsoft was formed.
Amdahl will continue to sell its Platinum/400 disc mainframe sub-system but can be expected to withdraw from the mainframe storage market before long. The company's GSS 4900 Gigascreamer disc sub-system, launched in September, was its first large capacity system that cannot be attached to mainframes.