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    IBM Cloud Infrastructure Share Hits Two-Year High: Study

    Written by

    Darryl K. Taft
    Published April 1, 2013
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      New data from Synergy Research Group shows that IBM’s share of the cloud infrastructure equipment market hit a two-year high in the fourth quarter of 2012, reaching just over 19 percent, thanks to a year-end jump in sales.

      Synergy said HP has seen its fortunes in the market gradually declining, but it too saw a year-end jump in sales that pushed its market share back to nearly 16 percent. Conversely, the Synergy Research data showed that Cisco has been steadily increasing market share but lost some momentum in the final quarter.

      “Cloud usage is now booming and this is driving continued high levels of investment in cloud infrastructure,” said Jeremy Duke, Synergy Research Group’s founder and chief analyst, in a statement. “No less than 45 percent of data center infrastructure shipments are now associated with the cloud, with just over half of that supporting public cloud services. The economic advantages of moving to the cloud are quite clear, and increased adoption is helping to gradually diminish concerns about security.”

      According to Synergy Research Group, full-year 2012 cloud infrastructure revenues passed the $40 billion mark, up 4 percent from 2011, with fourth-quarter revenues coming in at just over $11 billion. The three main segments of the market are servers (51 percent of fourth-quarter revenues), storage (21 percent) and networking infrastructure (23 percent). In the fourth quarter, IBM’s share of the server segment climbed to more than 30 percent, while it also maintained second-place ranking in the storage segment, behind EMC, despite seeing its storage revenues decrease 9 percent from the third quarter.

      In January, IBM announced fourth-quarter 2012 net income of $5.8 billion, compared with $5.5 billion in the fourth quarter of 2011, an increase of 6 percent.

      “We achieved record profit, earnings per share and free cash flow in 2012,” Ginni Rometty, IBM chairman, president and CEO, said in a statement. “Our performance in the fourth quarter and for the full year was driven by our strategic growth initiatives—growth markets, analytics, cloud computing, Smarter Planet solutions—which support our continued shift to higher-value businesses.

      “Looking ahead, we continue to invest to deliver innovations for the enterprise in key areas such as big data, mobile solutions, social business and security, while expanding into new markets and reaching new clients,” she said. “We are well on track toward our long-term road map for operating EPS [earnings per share] of at least $20 in 2015.”

      IBM’s fourth-quarter revenues from its Software segment were $7.9 billion, up 3 percent from the fourth quarter of 2011. Revenues from IBM’s key middleware products, which include its WebSphere, Information Management, Tivoli, Lotus and Rational products, were $5.5 billion, an increase of 5 percent from the fourth quarter of 2011. Operating systems revenues of $709 million were flat compared with the prior-year quarter.

      “We saw software growth across the portfolio,” said Mark Loughridge, senior vice president and chief financial officer for finance and enterprise transformation at IBM, in a call with analysts.

      Moreover, growth in IBM’s Software segment was driven by demand for IBM’s growth initiatives, which include Smarter Planet, cloud and business analytics—all software-intensive areas. Business analytics grew 13 percent, Smarter Planet rose 25 percent and IBM’s cloud business increased 80 percent, Loughridge said.

      Revenues from the Systems and Technology segment totaled $5.8 billion for the quarter, down 1 percent from the fourth quarter of 2011. Excluding Retail Store Solutions (RSS), revenues were up 4 percent. Revenues from System z mainframe server products increased 56 percent from the year-ago period; revenue in growth markets increased 68 percent. Systems and Technology revenue growth came primarily from sales of IBM’s new System z mainframe, Loughridge said.

      Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), increased 66 percent from the prior year and represented the largest MIPS shipment quarter in the company’s history. New workload specialty engines, including Linux, represented half the MIPS shipped, Loughridge said.

      Revenues from Power Systems decreased 19 percent from the 2011 period. Revenues from System x decreased 2 percent, and revenues from System Storage decreased 5 percent. Revenues from Retail Store Solutions decreased $239 million year-over-year as a result of the divestiture in the third quarter. Revenues from Microelectronics OEM increased 4 percent.

      Darryl K. Taft
      Darryl K. Taft
      Darryl K. Taft covers the development tools and developer-related issues beat from his office in Baltimore. He has more than 10 years of experience in the business and is always looking for the next scoop. Taft is a member of the Association for Computing Machinery (ACM) and was named 'one of the most active middleware reporters in the world' by The Middleware Co. He also has his own card in the 'Who's Who in Enterprise Java' deck.

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