IBM's Systems & Technology Group saw its best quarter in a decade based on hardware sales in the first quarter of 2011, and analysts say it is because IBM has the right mix at the right time.
IBM executives are making all the
right moves when it comes to the company's hardware business.
STG (Systems & Technology Group) showed
its best quarter in a decade when the systems giant announced its first-quarter
April 19. During a call with analysts announcing the first
quarter earnings, Mark Loughridge, IBM's
chief financial officer, said IBM's STG
roared to its best first quarter in more than a decade-up $4 billion, or 19
percent year-to-year-with double-digit growth in all brands, including System z
mainframe, Power, System x, storage and microelectronics.
success in servers and systems is tied to the strategic decision IBM
made during the 2008 recession to invest billions of dollars in hardware, with
a focus on innovation and integration at every level of the systems stack, from
semiconductor technology through application optimization, IBM
investments in high-value and high-growth areas like workload optimization,
analytics, virtualization and data center energy efficiency are bearing fruit.
In 2010, IBM released significant new
product enhancements across its entire portfolio, from a radically redesigned
System z mainframe and Power to Intel-based System x and storage.
our Power business, IBM has focused on
advanced technology to address emerging client needs for advanced analytic
workloads, private and secure clouds, and Smarter Planet applications such as
smart energy grids, all of which provide new opportunities for growth,"
Tom Rosamilia, general manager of System z and Power systems at IBM,
said in an interview with eWEEK. "In 1Q, Power systems revenue grew 19
percent year-to-year, reflecting the strong market acceptance of our Power7
product line introduced in 2010. Additionally, IBM
recorded 210 competitive displacements resulting in more than $200 million of
business, with roughly 60 percent of those wins coming from Oracle's legacy Sun
installed accounts and 30 percent from [Hewlett-Packard] accounts."
on IBM hardware surge, Greg Richardson, an
analyst with Technology Business Review, said:
efforts to build need-based systems out of integrated pieces of hardware have
enabled the company to arrive at a utopia of balanced growth across its Systems
and Technology Group. IBM delivered
double-digit revenue growth across all of its hardware lines, led by a
cyclically strong System z, which increased 41 percent year-to-year, and 19
percent growth in Power Systems revenue, which experienced increased revenue in
low- and high-end engagements. In addition to strong revenue momentum, IBM
benefitted from a shifting mix to high-margin System z and improved operational
leverage across its STG business units to
drive profit growth in 1Q11."
first quarter 2011 results followed a 2010 fourth quarter in which IBM
showed the best year-to-year revenue growth in servers since at least 200-22
percent, with double-digit growth in several product areas and growth in every
sales in emerging markets
in Asia, Africa
and South America grew 19 percent in 1Q," Rosamilia
said. "The IBM mainframe, declared dead
not too long ago, continues its resurgence-in part because of inroads it's
making in Africa as evidenced by recent purchases in Cameroon,
Senegal and Namibia."
Rosamilia noted that April 20 marked the second anniversary of Oracle's
announcement that it would acquire Sun Microsystems. Deutsche Bank Global
Markets said in a March 26 research note, "IBM
has consolidated over 30 points of share in the mid-range server market since
2000 at the expense of both Oracle/Sun (minus 5 pts) and HP (minus 19
points)," and "IBM's Power
architecture arguably has a 1 to 2 generation lead over UltraSPARC, suggesting
it is best positioned to win these customer migrations."
addition to the 210 displacements Rosamilia noted for the first quarter, in
2010 more than 2,900 customers moved critical business workloads to IBM
servers and storage systems-more than 1,100 from Oracle-Sun and more than 750
from HP. According to IDC, Oracle-Sun has lost server share the last
eight quarters and its annual server share losses are accelerating (0.6 points
lost in 2008; 1.2 points in 2009; 8 points in 2010). IBM
took back the lead in server revenue market share as 2010 drew to a close,
according to Gartner and IDC.
February, IBM's Watson beat two past
champions on "Jeopardy," demonstrating how an optimized system in a
commercially available Power 750 environment could provide the performance
needed to interpret and answer complicated questions in real time. Though
Watson is equipped with special software from IBM
Research, the Power 750 systems behind Watson are the same that can help any
bank, retailer or utility process an enormous amount of information and run
thousands of analytical tasks at once, IBM
Technology Business Research's Richardson
added that "IBM is building a suite of
hardware, software and services solutions around its new zEnterprise 196-core
mainframe platform. The company updated the value proposition for its
mainframes, targeting and optimizing select workloads such as mission-critical
applications, transaction processing, virtualization, data warehousing,
analytics and private cloud computing."
also recently announced plans
to support Windows
servers running on the IBM
zEnterprise mainframe systems.