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Microsoft Invests in PSI, That Thorn in IBM's Side
Goldman Sachs/Intel-backed start-up is threatening IBM's precious mainframe monopoly with its Itanium-based servers
By: Maureen O'Gara
Dec. 1, 2007 11:45 AM
Microsoft has kicked into the $37 million third round just raised by Platform Solution Inc. (PSI), the Goldman Sachs/Intel-backed start-up threatening IBM's precious mainframe monopoly with its Itanium-based servers that run z/OS, Windows, Linux, Unix and Open VMS.
In fact all of PSI's existing underwriters, including BluePrint Ventures, InterWest Partners and Bahrain-based InvestCorp, anted up, indicating what they think of the viability of the PSI boxes IBM claims are deficient and dicey as well as the company's chances of wrestling Big Blue's highly profitable monopoly away from it
Microsoft has also signed a joint marketing and sales agreement with PSI figuring PSI will give it entry to a market it hasn't had access to before.
The pair is supposed to pursue accounts that want their Windows applications and mainframes to interoperate.
The new money brings the total investment in PSI to somewhere near $100 million - it won't say exactly how much, only somewhere between $60 million and $100 million - because it doesn't want IBM to know what its resources are.
See, IBM refuses to allow z/OS to run on PSI's Open Mainframes and so PSI is suing IBM for antitrust, hitting it with both barrels of the Sherman and Clinton Antitrust Acts in a plethora of monopoly charges that include tying the z/OS software to mainframe hardware, a serious antitrust no-no and something IBM is specifically forbidden to do under the lingering terms of its now dissolved 1956 consent decree with the Justice Department.
It is also suing IBM for coming between it and its acquisition by HP and for threatening PSI customers with "being drawn into the lawsuit," PSI says.
It claims damages in the hundreds of millions of dollars from the loss of its acquisition alone and is in "dialogue" with the Justice Department.
PSI CEO Michael Maulick, himself an IBM mainframe veteran, says the new money, earmarked for expanding both direct and indirect sales as well as engineering, means PSI can "see it through trial and resolution."
Not that PSI was worried about paying for the antitrust suit. Its chi-chi lawyer Susman Godfrey has take the case on contingency with Stephen Susman, one of the top-ranked business litigators in the country, reportedly rating the case "the best antitrust case I've ever seen."
There are however multiple law firms to pay. IBM, which started the litigation, is suing PSI for misappropriation of trade secrets, patent and copyright infringement and breach of contract demanding all sorts of damages.
Anyway, what with IBM poisoning PSI's wells with customers Microsoft's participation gives PSI a new reason to focus on becoming what Maulick calls "a universal consolidation play."
Its Amdahl-derived firmware, he says, offers Windows Server 2008 the mainframe-style RAS traits that Microsoft can't get on other machines. At the same time he reckons PSI could be Itanium's "killer app," which would please Intel no end.
IBM hasn't cowed all of PSI's customers. There are PSI machines in production, Maulick says, and other accounts are "retooling" for its next-generation System64, servers that are supposed to be the equivalent of a z9 BC and go from 250 MIPS to 2,000 MIPS.
The litigation is now in the deposition/discovery phase with the expectation of going to trial in the federal court in White Plains in 4Q08.
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