Another mainframe maker, the Unisys Corporation, also reported better-than-expected second-quarter earnings yesterday, surpassing forecasts by a wide margin.

But the competition in open systems is stiff and the margins are lower than the mainframe makers are accustomed to.

Mainframe Slide Slows To try to retain clients, mainframe makers led by I.B.M. have been forced to cut prices sharply and reduce revenues.

Executives at mainframe makers point to the tremendous software investment that companies have made and say it will place a big obstacle in the way of a shift to smaller systems.

Indeed, the three mainframe makers with the fastest growth are each preparing to introduce a new generation of machines.

Most software development in Japan is under the aegis of the mainframe makers, but much of this work is subcontracted to subsidiaries or small independent software houses.

NEC has however adopted a totally different strategy from Japan's top two mainframe makers.

Japanese mainframe makers pursued this 'IBM-compatible' strategy, as did many entrants to the micro-business, from Silicon Valley to South Korea, by producing 'IBM clones'.

Customers chained to their machines by proprietary software will slow the shift, and so will the severe price cuts by mainframe makers.

The first is the story of how mainframe makers failed to take the personal computer seriously until it was too late.