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IBM Falls Short of the Goal Line in 1Q13

Will Linux help power Big Blue forward to future growth?

IBM is not starting of its fiscal 2013 year on a particularly strong note. Big Blue reported its first quarter earnings late Thursday, showing declining revenues and income as system sales slow, though IBM does see some bright spots, particularly with Linux

For the quarter, IBM reported revenue of $23.5 billion, which is a five percent year -over-year decline. First-quarter Net Income was reported at $3.0 billion, down 1 percent year-over-year. Leading the decline is a 17 percent drop in IBM System and Technology revenue.

During IBM's earnings call, Mark Loughridge, Senior Vice President and Chief Financial Officer, Finance and Enterprise Transformation at IBM, blamed part of the decline on an inability to close a number of big deals before the end of the quarter.

"We had solid profit performance in January, but as the quarter ended hundreds of millions of dollars of very profitable software and System z mainframe deals fell short of the goal line," Loughridge said. "This impacted the first quarter close, but the rollover of these deals positions us for a strong start in our software and mainframe business in the second quarter."

In addition to the mainframe shortfall, Loughridge said that elements of IBM's Power x and storage product lines showed disappointing performance and underperformed expectations.

Servers

On a positive note, Loughridge highlighted IBM's momentum with its PureSystems integrated server portfolio. The PureSystems portfolio includes integrated server, storage and networking optimized for specific application workload use-cases.

"We completed our first 12 months of operations for PureSystems and have sold over 4,000 systems in over 90 countries," Loughridge commented.

Power on Linux

IBM's POWER based system revenue was also down significantly during the quarter suffering a 31 percent decline.

"Our declines were driven by both the high performance computing segment, where we had a strong performance last year, and the impact of the transition to POWER7+," Loughridge said.

The POWER7+ server lineup was expanded in February of this year with a new range of entry level server systems.

While POWER based systems are often associated with IBM's AIX UNIX operating system, it can also be used for Linux workloads. Loughridge said that IBM's plan is to expand the POWER platform to go after the Linux opportunity.

"This opportunity is of similar size to Unix but growing faster," Loughridge said. "We’ve already had some key successes with wins this quarter in China and in Europe and in fact Watson is based on Power Linux. Though this will take time to mature, it provides a real opportunity for future growth."

Sean Michael Kerner is a senior editor at Datamation and InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals. Follow him on Twitter @TechJournalist.




Tags: Linux, IBM, networking, earnings, Storage


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