IBM Unix Biz Continues to Fall as Cloud Rises

Hardware revenues plummet at IBM, but rapid growth in its Cloud unit offers a contrasting view.

IBM reported its fourth quarter and full year fiscal 2013 results late Tuesday, showing continued declines in its hardware business, as software and cloud initiatives move the other way.

For the quarter, IBM reported revenue of $27.7 billion, which is a five percent year-over-year decline. Net Income for the quarter was reported at $6.2 billion for a six percent year-over-year gain. For the full year, IBM's 2013 revenue was reported at $99.8 billion for a five percent decline, with Net Income of $16.5 billion for a one percent decline.

The area of largest weakness for IBM was its hardware business.

"We are dealing with some challenges in our hardware business model specific to Power, storage and x86," Martin Schroeter, CFO and Senior Vice-President at IBM said during the company's earnings call. "In fact, our hardware segment profit was down over $750 million in the quarter and $1.7 billion for the year."

IBM's Power business was particularly hard hit, with Schroeter noting that revenue declined by 31 percent.

"We continue to shift significant capacity into the Unix market, however this has been more than offset by significant price performance resulting in lower revenue," Schroeter said.

IBM is taking multiple actions to breath renewed life and vigor into its Power systems, including making it an attractive platform for Linux deployments. Schroeter noted that in the fourth quarter of 2013 IBM debuted an integrated facility for Linux offerings, which enables IBM clients to run Linux workloads in their existing servers. He added that the Power Linux strategy will further expand as IBM moves to its Power 8 architecture later this year, which will deliver enhanced cloud and Big Data features.

Even though IBM is taking steps to enliven its Power hardware business, a full return to past performance isn't likely in the cards.

"We recognize that the Power platform will not return to prior revenue levels," Schroeter said. "We will take action in this business to reflect the new business model."

There is a bright spot in IBM's hardware business though, with the integrated PureSystems approach. IBM first launched PureSystems in April 2012 as an initiative integrating server, storage and networking components to enable application deployment.

"Across our hardware products Pure revenue was up more than 30 percent, sequentially," Schroeter said. "Globally, we shipped over 2,500 systems in the fourth quarter and over 10,000 systems to-date."

Cloud

IBM's software business is also on the upswing, with income for 2013 reported at $11.1 billion for the year. Growth for IBM software is being buoyed by the WebSphere middleware solutions.

"We had great performance in WebSphere, revenue was up 15 percent at constant currency and we gained share," Schroeter said. "We had good growth in both our on-premise application server business and newer cloud based offerings."

Cloud was highlighted by IBM as key area of growth in general, with Software-as-a-Service, private, public and hybrid cloud solutions.

"For the year we delivered $4.4 billion of revenue for cloud solutions," Schroeter said. "That's up 69 percent year-to-year and within that $1.7 billion was delivered as a service."

Sean Michael Kerner is a senior editor at Datamation and InternetNews.com. Follow him on Twitter @TechJournalist




Tags: cloud computing, IBM, hardware, Unix


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