International Business Machines Corp is the dominant provider of mainframe computers, selling machines that run on powerful microprocessors of its own design and priced starting at about $1 million. Its chief competitors are high-end servers from Hewlett-Packard Co and Oracle Corp.

IBM said it spent more than $1 billion developing the updated machines, focusing on efforts to boost their computing performance, capacity and features.

Analysts said existing customers are likely to appreciate the new bells and whistles. But they cautioned it will be tough for IBM to win new clients as most businesses are already enamored of cheaper technology that is widely considered "good enough" for all but the most mission-critical tasks.

"It's going to be harder and harder for IBM to find new customers and new opportunities for the mainframe," said Charles King, an analyst with technology research firm Pund-IT.

Officials with IBM said the company has "thousands" of mainframe customers around the globe but declined to be more specific.

Gartner estimates that annual global sales of mainframes will fall this year and each year through 2016, declining a total of 14 percent over the five years to nearly $4.7 billion.

Shipments of the new product begin next month. Mainframe sales typically pick up for several quarters after a product launch due to pent up demand from customers waiting for the newest technology.

Gartner analyst Jeffrey Hewitt said current mainframe customers are likely to stick with the technology. That group includes government agencies, financial services companies and other businesses that require tremendous computing power, extreme speed and very high reliability for certain tasks such as processing credit card transactions.

Yet he said that demand will grow at a brisk pace for less-expensive servers running on x86 chips from Intel Corp and Advanced Micro Devices Inc. Software makers have developed technology in recent years that enables companies to combine those servers into clusters capable of managing some tasks once handled only by mainframes.

Gartner forecasts that sales of x86 servers will surge 10 percent this year to $39 billion. In the five years to 2016, annual sales of those machines will climb a total of 33 percent to $47 billion, or more than 10 times the mainframe market according to the firm's forecasts.

(Reporting By Jim Finkle; Editing by Richard Chang)

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