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IBM lands giant server deal with China

IBM and HP trade barbs over $20 million deal that Big Blue's largest Unix installation ever in Asia.

The Chinese government will purchase more than $20 million worth of computers from IBM, making it Big Blue's largest Unix installation ever in Asia, the company said Wednesday.

The contract calls for China's tax administration agency to buy 100 IBM eServer p5 servers, IBM said. The agency is in the midst of a billion-dollar computer overhaul, the company said.

The agency also uses Hewlett-Packard servers, and IBM said it beat out HP for the contract. IBM cast the deal as a major victory as the two companies wrestle for market share in the Unix server market. "The IBM win is unprecedented in size, scope and impact on a competitor," an IBM representative said.

HP downplayed the loss. In a statement, the company said the Chinese agency will continue to use 80 big HP computers, including 46 Superdome machines, purchased last year. That deal represents HP's largest Superdome installment ever.

"The customer did put out a bid on a separate project, which IBM did win, but it's by no means a 'displacement,'" Rich Marcello, the head of HP's high-end server business, said in a statement. "IBM's 'news' is nothing to crow about--it's all part of the normal ebb/flow of the server business."

Yet one analyst said the deal is another "proof point" of IBM's resurgence in the Unix server market in the past few years. IBM has caught up to HP, Sun Microsystems and others by adding server management and system utilization features that have boosted the efficiency of running such machines, said Dan Olds, founder of Gabriel Consulting Group.

Plus, many HP customers are "on the fence" about HP's switch to Intel's Itanium chips, which will require them to do some migration work. "If customers are viewing that not as a simple upgrade but as a full migration, then they might start looking at what Sun and IBM are offering at the same time," Olds added.