Power Systems Eating Into Mainframe Sales
Published: Jan 23, 2012
by Timothy Prickett Morgan
IBM sealed out 2011 on a rather gloomy note in terms of hardware sales, though not since of a Power Systems line. That’s good news for any patron that relies on Power Systems, and so is a fact that Big Blue is hidden divided business from Unix rivals Hewlett-Packard and Oracle, and so is IBM’s straightforward acknowledgment that Power7-based machines are also holding share divided from System z mainframes in a craving shred of a server racket.
IBM reported a financial formula for a fourth entertain of 2011 after a marketplace sealed final Thursday, and since of banking fluctuations due in vast partial to a financial predicament in a Eurozone, a company’s requisitioned income was about $300 million reduce than it expected, adult usually 1.6 percent to $29.5 billion. IBM is all about boost and generating income to buy behind shares and compensate dividends, so a fact that net income rose by 4.4 percent to $5.49 billion was no doubt some-more critical to new IBM boss and CEO, Ginni Rometty, who took over regulating a association on Jan 1.
“We had a clever fourth-quarter performance, capping a year of record gain per share, revenue, distinction and giveaway income flow,” Rometty pronounced in a normal canned matter that IBM’s CEO creates when financials are announced. “We delivered superb formula in all 4 of a vital initiatives for a entertain and a year, as we continued to comprehend a advantage of a long-term investments in expansion markets, business analytics, Smarter Planet solutions and cloud. We are good on lane toward a long-term roadmap for handling gain per share of during slightest $20 in 2015.”
The association is raised EPS of during slightest $14.85 in 2012, adult 10.5 percent from 2011 and if story is any beam and if a economy binds up, Big Blue will roughly positively lift that superintendence as a year rolls on.
For IBM i customers, a health and resources of Systems and Technology Group, that is still operationally rather distant from Software Group even after these dual collection of IBM’s systems business were joined a year and a half ago, is a vast deal. And how good or feeble a Power Systems multiplication does matters particularly, even if a IBM i height is substantially a tiny apportionment of that altogether business these days. As prolonged as Power Systems is flourishing and creation money, IBM is not looking around for some place to make cuts there.
In a fourth quarter, IBM pronounced that Power Systems sales rose by 6 percent, and until Gartner and IDC put out their particular server sales and shipments until maybe subsequent month, we won’t know if that is improved or worse than a server marketplace during large. In a discussion call with Wall Street analysts going over a numbers, Mark Loughridge, IBM’s arch financial officer, pronounced that IBM had 350 rival takeouts with Power-based systems opposite HP and Oracle in a fourth quarter, and that these deals generated some-more than $350 million. IBM did over 1,000 such deals in 2011, and they generated some-more than $1 billion in revenues primarily and, if all goes as story tends to, these business will spend many some-more billions on IBM things and services.
IBM’s System z mainframe business swooned, with revenues down 31 percent even with an total MIPS conveyance decrease of usually 4 percent. IBM has clearly ran out of fervent mainframe buyers for a vast zEnterprise 196 machines launched in Jul 2010 and a zEnterprise 114 “midrange mainframes” that followed them in Jul 2011 were never going to be vast income generators. Loughridge pronounced that distinction margins for a System z line were adult notwithstanding a hardware decrease since of “a aloft suit of microcode upgrades,” and we am not unequivocally certain what he means by that, though if it is true, afterwards mainframe microcode contingency be one really costly square of program from Big Blue. Maybe he meant that business were spending some-more on mainframe systems software?
In a doubt and answer event following Loughridge’s prepared remarks, IBM’s CFO pronounced that IBM gained share in 15 of a 16 vital product segments it operates in, and that mainframes were a one where it mislaid share. And in a singular impulse of unscripted honesty, Loughridge certified that IBM’s mainframes mislaid share in a craving shred of a server market. “And who do we consider we mislaid share to?” he asked rhetorically. “Power series, a possess product line.”
Even IBM can’t stop job it pSeries. . . .
Not surprisingly, IBM’s System x and BladeCenter business regulating X86 processors didn’t do so good in a fourth quarter, with sales down 2 percent. Intel is late removing a “Sandy Bridge-EP” Xeon E5 processors to market, that were widely approaching final fall, and tough hoop shortages since of a comfortless flooding in Thailand are also carrying an impact on all server makers. Loughridge did not elaborate on whatever is going on with IBM’s X86 business, solely to contend that he believed that a 2 percent income decrease was in line with a market.
IBM’s storage hardware sales fell by 1 percent in a fourth quarter, though storage program for several arrays and systems shot adult by 30 percent, so a total storage-related income tide was indeed adult 5 percent in a quarter.
For all of 2011, Systems and Technology Group had usually a smidgen underneath $19 billion in sales (up 5.6 percent from 2010) and pre-tax income of $1.6 billion (up a most improved 12 percent).
Loughridge pronounced that IBM’s hardware business will face a tough review in a initial half of 2012, though that with new product announcements approaching in a second half of a year, Systems and Technology Group should be means to lift out mid-single number income expansion this year with double-digit pre-tax distinction growth. He did not elaborate what those announcements competence be, though we know new Xeon E5 servers are entrance in a open and it is reasonable to design Power7+ kickers this year and maybe even a mainframe processor upgrade.
The soothing side of Big Blue
The bulk of a black ink that hits IBM’s bottom line comes from Software Group, that posted $7.65 billion in revenues in a fourth quarter, adult 8.7 percent. The program apportionment of IBM’s product lines (which includes Netezza information room appliances, paradoxically, though not some systems software) had a pre-tax income of $3.7 billion, an boost of 12 percent over final year’s fourth quarter. WebSphere middleware sales were adult 21 percent, Tivoli confidence and systems government sales were adult 14 percent, and information government (database, information warehousing, and analytics tools) saw a 9 percent increase. Rational expansion collection were adult 4 percent, and a Lotus partnership products posted a 2 percent decrease in a quarter. These 5 pivotal branded middleware segments accounted for $5.2 billion of a quarter’s sales, and handling systems accounted for $688 million.
In a 12 months of final year, Software Group had 24.9 billion in revenues, rising 10.9 percent partly by organic expansion and partly by acquisitions from a before several years. The organisation brought in usually a hair underneath $10 billion in pre-tax income, that was usually adult 5.3 percent compared to a year ago. So there’s some domain vigour in there. So design some some-more divestitures like a sale of a iCluster product line to Rocket Software, that happened during a finish of 2011.
In Q4, IBM’s Global Services leviathan grew sales by usually 2.7 percent, to $15.33 billion, though it was means to jack adult boost extremely by chasing aloft value business, according to Loughridge. we also occur to consider IBM is offshoring some-more of this work from a United States and Europe to cut costs, though IBM never talks about this and ducked questions on it final week. For all of 2011, Global Services had $60.13 billion in sales, adult 6.6 percent. IBM exited 2011 with a $141 billion backlog, and about 70 percent of a runout from that reserve that comes due in 2012 will broach 3 percent income expansion this year for Global Services if it doesn’t make even one some-more sales call. IBM is feeling flattering assured about services–most of that IBM i shops don’t consume.
I have pronounced it before and we will contend it again. If we wish to save a IBM i business, we have to modify it from being a hardware sale to a services contract. And we am not articulate about leasing. we am articulate about on-premise and open clouds regulating IBM i and charity live migration, application pricing, and all a complicated ways of computing.