IBM mainframe acquisition raises antitrust concerns

IBM's acquisition of Platform Solutions (PSI) has ended the legal wrangling between the companies, but it also raises new antitrust issues

IBM has acquired Platform Solutions, a vendor of mainframes and other computer hardware, in a move that raised antitrust concerns from one IT trade group.

IBM's acquisition of Platform Solutions, announced Wednesday, ends lawsuits the two companies had filed against each other. In November 2006, IBM filed a lawsuit against Platform Solutions (PSI), accusing the Sunnyvale, Calif., company of patent infringement by creating computers that allow customers to run IBM's System z operating systems and software on mainframes from other vendors.

PSI filed a countersuit in January 2007, accusing IBM of antitrust violations and unfair competition.

IBM and PSI did not disclose the financial terms of the deal.

The Computer and Communications Industry Association (CCIA) said Tuesday that the acquisition will allow IBM to swallow up its "most significant" competitor in the mainframe market.

"This is a black-hole acquisition," said CCIA president and CEO Ed Black. "It sucks the life out of the market and destroys the matter."

The deal transforms a market with potential for competition into one "with little prospects for anything but complete domination by IBM," Black added in a statement.

CCIA has long been a critic of IBM and some other tech mergers. The IBM deal may fall below the financial threshold for a mandatory review by U.S. and European Union antitrust regulators, CCIA said, but the trade group urged authorities in both locations to look into the deal's potential impact on the mainframe market.

In addition, the deal could affect PSI customers' ability to get mainframes based on open systems, CCIA said. PSI products are based on open systems, while IBM's mainframe products are based on proprietary systems, the group said.

More than 80 percent of the world's corporate and government data resides on mainframes, the CCIA said.

The U.S. Department of Justice abandoned a 1956 antitrust consent degree against IBM in 2001, CCIA noted. The DOJ said then that IBM could be subject to a new antitrust lawsuit if it engaged in anticompetitive behavior.

This week, mainframe vendor T3 Technologies said it planned to file an antitrust complaint against IBM with the European Commission. IBM has shut out other mainframe vendors by ending support for older mainframe systems and not licensing its mainframe software to rivals, T3 said this week. The company in November filed a request to join PSI's U.S. lawsuit against IBM.

"CCIA strongly believes that IBM's actions since the consent decree was dissolved, the purchase of PSI and these new allegations by T3 collectively paint a convincing picture that IBM has gone back to its old ways," Black said. "When it comes to violations of competition law, IBM appears to be an unrepentant recidivist."

An IBM spokesman downplayed CCIA's concerns. IBM has focused on making its mainframes open servers that run open technologies such as Linux and Java, said spokesman Tim Breuer. Applications that run on IBM's mainframes run on other major servers, he said.

In addition, IBM disputed CCIA's view of the mainframe market. "IBM's mainframes compete in an intensely competitive worldwide market with a variety of alternative platforms offered by many competitors," Breuer said. "IBM's acquisition of PSI will enhance the ability of IBM's mainframes to compete against those alternative platforms."

IBM said PSI's technologies will become part of IBM's long-term mainframe engineering cycles.

"We are pleased to become part of IBM, knowing IBM has the industry's most comprehensive vision for the future direction of enterprise computing, and has the requisite technologies to realize that vision," Michael Maulick, PSI's president and CEO, said in a statement.

The acquisition "makes the most sense" for the two companies, Maulick added.

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