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IBM Wins Huge Outsourcing Deal as Hardware Revenues Slip

IBM second quarter earnings shows weakness in hardware, strength in the cloud.

IBM reported its second quarter fiscal 2013 earnings on Wednesday night, with numbers that aren't particularly impressive. Yet there is a light at the end of the tunnel for IBM and it's likely in the cloud.

For the quarter, IBM reported revenue of $24.9 billion, which is a 3 percent year-over-year decline. Net Income was reported at $3.2 billion for a 17 percent decline over the second quarter of 2012.

Part of IBM's woes come from a slump in its hardware business. IBM's Systems and Technology unit revenues came in at $3.8 billion for the quarter, which is an 11 percent decline. One area where IBM is being hit hard is with its Power Systems which had a 25 percent year-over-year revenue decline.

"Power continues to outperform the UNIX competition and it gained share again this quarter as we continue to expand our Power platform to go after the Linux opportunity," Mark Loughridge, IBM's Senior VP and CFO, said during his company's earnings call. "We expect a sequential improvement in Power will continue in the second half, as adoption of our new POWER7 plus products continues."

In contrast with the challenging hardware business, IBM's Software business is going the other way. For the quarter, IBM reported software revenue of $6.4 billion, which is a 4 percent year-over-year gain.

Outsourcing Win

During the earnings call, Loughridge noted that IBM signed 15 deals over $100 million during the second quarter. Included in that mix is a multi-billion-dollar outsourcing deal in Europe.

"The European deal is a very interesting one in itself, because IBM for this customer will transform the underlying technology, including new analytics and cloud models enabling business innovation for the client," Loughridge said. "So this is great example of how the outsourcing business is evolving as clients look to IBM for supporting leveraging new technologies such as cloud."

The European client is banking giant UniCredit and will actually include the creation of a joint venture with IBM, which will be called UniCredit Business Integrated Solutions. Part of the solution will include a cloud analytics piece.

IBM spokesperson Collen Haikes told Datamation that the deal is a, 'multi-billion dollar win over 10 years.'

The win was also part of a competitive bidding process. According to IBM, UniCredit wanted to move its IT sourcing beyond basic needs like cost-cutting.

"They were looking for a partner for their business outcomes, such as growth, competitive advantage and innovation," Haikes said. "IBM is leads in applying innovative technologies such as cloud, analytics and mobile to the business. Overall IBM was the best fit."

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




Tags: Cloud, IBM, outsourcing


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