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IBM’s fourth quarter overall revenues dropped nine percent

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January 20, 2016

Looking at recent numbers, IBM's storage value is clearly moving to software, with object storage and flash growing, while legacy disk and tape products' revenues are dropping rapidly.

In IBM’s fourth quarter, overall revenues dropped nine percent but storage hardware revenues were even worse, sinking 11.1 percent, with no end in sight in the near term.

To be sure, this continues a trend seen since mid-2012. The only bright spots seem to be flash arrays and server-based storage but we don’t know how bright that is, at least not yet.

IBM’s financial reporting singles out storage hardware but not flash within it. Big Blue doesn’t report server-based storage separately nor does it identify storage software revenues as a single reporting category.

We can see what’s been happening with the storage hardware category generally and it ain’t pretty.

The trend here is that IBM storage hardware revenues have seen four straight years of decline and there is no end in sight.

And IBM's management doesn't identify storage hardware as an area needing attention, despite annual revenues having dropped 35 percent over four years, from $3.7 billion in 2011 to $2.4 billion in 2015.

IBM CFO Martin Schroeter said in prepared remarks-- “A couple of years ago we laid out our strategic imperatives around big data and analytics, around the cloud, around mobile and in security.”

“Our strategic imperatives continued our strong performance, up 26 percent for the year. This now represents 35 percent of IBM’s global revenue,” he added.

“With about 57 percent revenue growth over the last year, cloud is now a $10 billion business for IBM. This made us the largest cloud provider in 2015,” he said.

“To address several opportunities we see in this segment, in 2015 we made seven cloud acquisitions including Cleversafe for object storage, Gravitant for cloud brokerage services, and Clearleap for cloud video services. We also invested nearly a billion dollars in capital expanding our global cloud data centre footprint to 46,” he asserted.

It’s not that hardware, per se, is bad, though. In Schroeter's words-- “Our Systems Hardware revenue was up, driven by z Systems and Power. This was the fourth consecutive quarter of growth in both z Systems and Power. About half of our systems segment revenue in 2015 was to address analytics workloads, or hybrid and private clouds. Even though the Unix market is declining, by delivering innovation and repositioning the platform, our Power systems have grown four quarters in a row,“ he explained.

But that apparent determination to grow the non-x86 server business was not paralleled in the storage hardware business.

“The growth in our servers was mitigated by a seven percent decline in storage hardware, which continues to be impacted by weakness in traditional disk and tape,” he asserted.

Source: IBM.

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