Informing the IBM Community

Has IBM halted Power’s sales slide?


IBM CEO DISCUSSES GROWING PARTNER ECOSYSTEMIBM reported its latest quarterly results this week and, for a change, there was actually something to cheer about for Power people.

If one looked beyond the corporation’s generally lacklustre headline figures, it seemed that it had finally stopped the downward spiral of its Power p and Power i server sales.

Admittedly, one had to look fairly hard for this good news. Revenues for IBM’s Systems Hardware segment were $1.7 billion for the quarter, down 23% on the same period last year. But, according to Big Blue, when the now divested System x side of the business was taken into account as well as the effects of a strong dollar, revenues were actually up 30%.

When looked at this way, Systems Hardware pre-tax income increased by half a billion dollars compared to the first quarter of 2014. Revenues from Power Systems were down 3%. But, said IBM, when adjusted for currency they were actually up 1%.

These figures are significant. Whether it’s because of a rush to the cloud or the collapse of sales in China post-Snowden, these are the best results for Power Systems since the first quarter of 2012. Back then, revenues were flat compared to the same period in 2010.

After that, they nosedived. At their worst, in the third quarter of 2013, they fell by an eye-watering 38%. Even as recently as the Q2 2014, they were down 28% and were still down 11% and 12% for the next two quarters.

Of course, we have little idea how Power i servers fared during this torrid time as IBM refuses to break out their numbers. But perhaps it is worth remembering that before this decline, the Power p was the undisputed champ of the Unix server wars. In Q4 and Q3 of 2011, for example, Power Systems as a whole were still booking 6% and 15% revenue increases quarter-on-quarter.

Whether Power Systems sales have now leveled out remains to be seen. IBM’s hardware division was bolstered in the first quarter of this year by particularly strong System z mainframe sales – up 130% when adjusted for currency. But because of the small size of the market for these big ticket refreshes, System z sales have always oscillated wildly up and down.

My guess is that Power Systems, which are increasingly subject to similar market forces, may see similarly dramatic swings in future.

Overall, IBM’s revenues fell by 12% in the first quarter of 2015. However, when the exchange rate was taken into account, they could be said to more or less flat with a net income of $2.4bn.

IBM is not the only U.S. firm blaming a strong dollar for underwhelming numbers. In recent days, Facebook, 3M and DuPont have all cited the dollar’s appreciation as having a negative effect of their quarterly results.

This has left financial commentators divided on the latest chapter of Ginny Rommety’s (pictured) stewardship of IBM. While some still have their knives out, others have been offering cautious approval, wondering whether there is light at the end the tunnel for the company.

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