System i revenue

Power Systems revenue down

IBM reported its second-quarter revenue for 2009 last week, and the news was mostly gloomy. The so-called “converged System p” platform decreased 13%, although believe it or not, that was the highlight of IBM’s system revenue numbers. The System z mainframe revenue tanked 39%, and the x86-based System x platform dropped 20%.

IBM isn’t the only company hit hard by these revenue figures, either. HP’s second-quarter results were similarly bad, with its servers and storage division down 28%. Dell hasn’t released its second-quarter results, but its first-quarter results saw a 29% drop in servers and networking.

System i hits new low: Revenue down 92%

This morning on the radio I heard that IBM had released fourth quarter and 2008 year end results, with the company reporting net income up 12%. But, the System i didn’t fare well in the company’s announced earnings, with a jaw-dropping decrease in revenue of 92% year-on-year. Last quarter, we reported that the System i revenue was down 82%. The explanation is that the company has combined the revenues from Systems i and p in the new converged System p numbers, and no longer attributes any new Power running i sales to the legacy system. On the positive side, revenues from the converged System p server products increased 8%, the only increase for the Systems and Technology hardware segment.

It seems that IBM, a company founded on “machines” has moved on and is now finding success in software, services and financing. In fact, IBM senior vice president and chief financial officer, Mark Loughridge, told a conference call of financial analysts that the company derived 90% of it’s revenue from these segments. But Loughridge shared the company’s optimism going forward, “With the stimulus packages being put in place, the economies will start to improve as we go to the back half of the year. Likewise, for the first quarter our performance will be relatively flat, with growth especially in second half of the year.”

And there it is: System i down 82%

Or so say the revenue figures from the IBM press release on the matter, which came out late yesterday.

As I wrote yesterday before the revenue numbers came out, this was precisely the reason why Ross Mauri, the Power Systems general manager, came out with an open letter to the System i community. Remember: that 82% drop compares all System i servers from the same quarter last year to pre-Power6 System i servers this year.

The “converged System p” revenue — which compared Power6-based servers running AIX and IBM i to the traditional System p servers of the same fiscal quarter last year (which didn’t run IBM i) — increased 7 percent. It remains to be seen whether IBM will continue to call the platform the “converged System p,” or just go to “System p” or “Power Systems.”

Either way, we have two more fiscal quarters of IBM doing this sort of comparison, and then most likely System i revenues will no longer be part of their quarterly announcement.

High-end and midrange defined

Last week I spoke to Ross Mauri, the IBM general manager of Power Systems, who talked some about the IBM financial numbers that recently came out. Mauri did some bragging about how Power Systems, which IBM called the “converged System p” line in its release, was up 29% year-over-year. Although this number is compared to just the System p servers alone from the previous year, it was still a good quarter.

Mauri added that among Power systems, the high-end was up 21% and the midrange was up 68%. Well, what does that mean?

Typically IBM thinks of the 590 as the high-end, the 570 as the midrange, and the 550 and below as small. But the way in which IDC, the Framingham, Mass. IT research firm, makes distinctions can muddy the waters a bit. For IDC, the high-end includes servers that are $250,000 and more, while the midrange is $100,000 to $250,000 and the small servers are less than $100,000.

Under those definitions, the 570 gets split up. Some of the 570s get calculated in the high-end alongside the 590s, and some of them get calculated in the midrange alongside the 550s. In the end, Mauri used these IDC definitions when stating the percentage increases above. But in general, it was interesting to discover what exactly constitutes high-end, and what exactly constitutes midrange, in the industry.

What the heck is converged System p?

If you’re like me, the recent IBM financial numbers had you wondering. Big Blue gave figures for the “converged System p” servers, which was up 29 percent, and “System i” servers, down 47 percent. In a word, ouch.

But it’s mainly ouch because of the way it makes System i look, and not necessarily because of how the platform actually performed. Let’s take a look at how it all breaks down, according to Ross Mauri, IBM’s general manager of Power Systems.

The “converged System p” line includes all the Power6-based servers that can run AIX and IBM i. When asked why the company doesn’t break that up into subsegments that includes i, Mauri said that they “did do that, internally, but we’re not giving out that information externally. We try to look at what the lead operating system is (for the user) during the purchase, but it’s not something that we can definitively explain.”

Further, the “converged System p” numbers from this quarter — which include the newer System i machines — are compared to the previous year’s System p only numbers. So it makes System p performance look better than reality, although by how much we’re not sure.

Meanwhile, the System i falling-off-the-cliff numbers only include what Mauri called “legacy” System i servers — that is, pre-Power6. Since IBM isn’t actively selling those machines as strongly as the new boxes, and because that number compares to the entire System i line from the year before, the precipitous drop-off isn’t as precipitous as it appears at first.

Mauri would only add that “System p Unix had an outstanding quarter and i had an OK quarter.”

Why IBM decided to report the Power Systems revenue as “converged System p” is a question Mauri couldn’t answer, but it likely has to do with investor expectations. They need points to compare, and a new division called Power Systems probably doesn’t do it for them. But in future years, look for IBM to start reporting numbers under Power Systems, instead of “converged System p.”

System i revenues down 21% in first quarter

This may be the last time IBM reports System i hardware revenues on their own. Seeing as the platform is now officially merged with System p into a new Power Systems, future hardware revenue figures will probably reflect that.

It’s probably a good thing.

System i revenues dropped 21 percent compared to the year-ago period. That compares to increased or flat revenue numbers from the other platforms — System z was up 10 percent, System p up 2 percent, and System x flat. Aside from a small blip at the end of last year, hardware revenues for the System i platform have been dropping steadily for a while now. Let’s take a look at the last three years per quarter:

Compare that to System p revenues in the same period:

Are there anymore questions about why IBM decided to merge the two platforms? Aside from the benefits of having a single hardware platform on the Power processor, the merger will eliminate those ugly-looking, often double-digit revenue decreases that System i was experiencing quarter after quarter after quarter.

Congratulations System i, your revenue is up

In its earnings report last week, IBM announced that revenue for System i was up 2%. It’s the first time System i revenue has been up year-over-year in two years. The chief financial officer at IBM, Mark Loughridge, said the rise was due to the introduction of Power6 System i 570.

Although the 2% increase is compared to a 10% decrease in the fourth quarter of 2006, it’s still a whole lot better than it going down again. And given Loughridge’s reasons for the increase, it’s fair to think that revenues might continue to rise in 2008 when more Power6 boxes become available.

Get ready for a shocker: IBM System i revenues dropped again

For what has now been eight quarters in a row — that’s two years — IBM System i revenues have dropped in year-over-year comparisons. You would think at some point that the platform’s revenue would have hit the bottom of the valley with nowhere else to go but up, but that simply has not been the case.

At least System i doesn’t have to feel alone this time. Mainframe revenues dropped 31% compared with a year ago, even more than the 21% decline that System i experienced. Overall, IBM system revenues decreased, while software and services increased.

The question, of course, is why? Why does revenue continue to free-fall? There must be reasons other than a marketing problem tied to a couple of name changes. Some think IBM hasn’t been pricing and engineering System i correctly to target it at a different customer base than System p, IBM’s Unix boxes.

It is good to see that IBM has reported System i revenues separately. When IBM decided to split System i into two divisions, it wasn’t clear whether it would be able to avoid this reporting requirement. Whether it’s required or not and despite the poor news, IBM is still doing it.

Then again, do hardware revenues matter? It’s common in many places for vendors to give away hardware so they can sell the software and services. This happens with cell phones, Internet service and cable. You get the cable box for free, then you pay for your monthly service bill. You get your wireless router for free, but then pay for Internet service access. Is that the way it’s going to be for server hardware, or is this just an excuse for IBM’s dismal results?

System i revenues drop again

Once again, every hardware platform that IBM sells gained revenue except for the System i, which dropped double digits.

Big Blue released its second-quarter results today. System i is down 15 percent from the same period last year. Meanwhile, System z is up 4 percent, System p is up 7 percent, and System x is up a whopping 16 percent.

This is not just a blip in the radar — System i year-over-year revenues have gone down seven quarters in a row. That’s almost two years. And even though IBM has recently claimed that it’s focused on System i customers and not System i sales, one still has to admit that this doesn’t look good.

Is there anything good that can come out of this? Let me know what you think.

System i revenues drop again

This is getting to be like a broken record, but System i revenues dropped again, this time 13 percent, in the first quarter of this year. It is the sixth consecutive quarter that year-over-year revenue has gone down. IBM said weak upgrade sales on the platform caused the decline.

Compared to the same quarter two years ago, System revenue is down about 33 percent. That’s a hard slump.
This time, System i’s drop was in the midst of gains on all other platforms: systems z, p and x. It’s not for lack of investment by IBM. In the last year it introduced a VoIP solution with 3Com exclusively on the System i, as well as new entry-level System i boxes.

But analysts say System i suffers from a marketing problem.