Integrated systems are in, mainframes are back and server sales aren't lighting up the scoreboard. Those takeaways are relatively obvious following IBM's fourth quarter results.
Big Blue reported a strong fourth quarter, but the hardware business delivered the most surprises even though systems sales overall were down 1 percent. Sure, the System z mainframe was going to benefit from a new product cycle, but analysts underestimated the strength. Meanwhile, IBM's PureSystems (right), launched in May, have ramped strong relative to Oracle's Exadata boxes and other rival machines.
- System z revenue was up 56 percent and MIPS (million instructions per second) were up 66 percent, which is the largest MIPS volume ever.
- As for System z, mainframe sales were up more than 50 percent in major markets and more than 65 percent in growth markets. IBM said that it landed net new customers for its mainframe. Also: IBM revamps mainframe for cloud, launches zEnterprise EC12
- PureSystems sold more than 2,300 units in more than 70 countries since the May launch. Macquarie analyst Brad Zelnick noted that that those results compare favorably to "Oracle Exa and Cisco UCS with much slower initial ramps." Also: IBM launches PureSystems, touts integration, flexibility | Can IBM redefine datacenter convergence with PureSystems?
- The hardware nit for IBM is that its Power line of server saw sales fall 19 percent, but the company said its new P7+ and product refresh will help sales.
Overall though, IBM's hardware results stood out. Meanwhile, IBM seems to be working the trench warfare game against Oracle/Sun and HP. IBM CFO Mark Loughridge said:
Our success in competitive take-outs continued in the fourth quarter. We had over 350 competitive displacements, resulting in over $335 million of business, about half of which came from Oracle/Sun and half from HP. For the year, we had nearly 1,200 competitive displacements, resulting in over $1 billion of business.
The game for IBM is clear. Establish a hardware beachhead in an enterprise and follow up with software and services.