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IBM Results Show Continued Hardware Challenges for Big Blue

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IBM reported its second quarter fiscal 2014 financial results on July 17, once again showing year-over-year declines in its hardware related business units.

For the quarter, IBM reported revenue of $24.4 billion, which is a one percent year-over-year decline. Net income was reported at $4.1 billion for a 28 percent year-over-year gain.

“We’re continuing to drive double-digit growth in the parts of our business that address the emerging trends in enterprise IT,” Martin Schroeter, Senior Vice President and Chief Financial Officer at IBM, said during his company’s earnings call. “We’re dealing with secular shifts in parts of our hardware business and as we shift to higher value, we have the impact of a divested business.”

IBM’s Systems and Technology business unit revenue was reported at $3.3 billion, which is a decline of 11 percent year-over-year.

“This is a significant improvement in the year-to-year performance compared to last quarter,” Schroeter said.

During IBM’s first quarter 2014 earnings, the company reported revenue of revenue of $2.4 billion for a 23 percent year-over-year decline for the Systems and Technology business unit.

“The improvement was driven by System z as well as sequential improvements in System x and Storage,” Schroeter said. “This, together with actions to align our structure to the demand profile, resulted in progress in stabilizing our profit.”

Schroeter noted that System z revenue was down one percent while System x revenue was down percent. IBM is currently in the process of divesting its System x business to Lenovo.

The biggest decline by percentage is in IBM’s Power hardware, with revenues down by 28 percent.

“The year-to-year performance reflects fundamental changes in the business, and as we have talked about in past calls, we have taken actions to align our structure to the demand profile, while investing to address where we see opportunity in the future,” Schroeter said.

Those actions including the launch of the initial entry level of Power8 server systems in April. IBM has also expanded its OpenPOWER consortium, which now have 36 members.

“Power 8 will be introduced into the mid-range and high-end segments over the remainder of the year,” Schroeter said.

IBM is continuing to push forward in other areas of business and in particular its’ mobile efforts thanks to a new partnership with Apple.

“With this partnership, IBM’s consultants and other client-facing specialists will help expand mobile device productivity, enabling big data and analytics at the point of contact,” Schroeter said. “Supporting our partnership with Apple, our software group will develop unique enterprise cloud services, native for iOS, to deliver the full enterprise-class mobile experience from analytics to cloud storage and data security.”

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

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