Computer Weekly Editor's Blog

Jan 24 2014   12:33PM GMT

IBM, Microsoft results demonstrate the pace of change in IT

Bryan Glick Bryan Glick Profile: Bryan Glick


The latest financial results this week from arguably the two most influential enterprise IT suppliers of the past 30 years demonstrate again how quickly the technology landscape is changing.

First, IBM. The company’s hardware revenue is crashing – down 26% year on year in its fourth quarter, following an 18% decline in the previous quarter.

It was no surprise when IBM subsequently announced the sale of its x86-based server business to Lenovo – the Chinese supplier that has managed to keep making a profit from IBM’s former PC division.

The acquisition, for $2.3bn and affecting 7,500 employees, was nearly $1bn less than Google paid just a week before for Nest, a company with about 200 staff that makes internet-connected thermostats.

IBM has hung on to its Power systems servers and its mainframes – each of which are much higher margin products than Intel-based servers, and have more strategic importance as IBM builds its cloud datacentres. But sales of both those product ranges fell faster than the x86 servers – down 31% and 37% respectively.

The cash from Lenovo won’t be sitting in IBM’s bank account for long. In the past few weeks, the company announced a $1.2bn investment in building cloud datacentres, and $1bn to grow sales for its Watson cognitive computing technology.

Before long, IBM’s own datacentres will be the biggest customer for its remaining server hardware.

Second, Microsoft. To the surprise of many, considering the general gloom that surrounds every mention of the software giant’s name, Microsoft beat expectations in posting record second quarter revenue.

But delving into the figures shows why – enterprise software spending was the star of the show, with SQL Server, System Center, Office 365 and Azure all doing well. Take out the new Xbox and Microsoft continues to decline as a consumer supplier – Surface tablet sales doubled, but Apple still makes seven times more revenue from the iPad. Many of those Surface sales no doubt went to corporate users anyway.

The messages are clear – the historic IT industry is commoditising; hardware is going into the cloud; and it will be increasingly difficult to maintain both a consumer and an enterprise IT business in one company.

IT managers need to closely watch these trends and adjust their supplier relationships accordingly.

3  Comments on this Post

There was an error processing your information. Please try again later.
Thanks. We'll let you know when a new response is added.
Send me notifications when other members comment.
  • louieeee
    Interesting read. Adaptation in the modern age is key for ensuring efficient processes, especially considering how quickly the digital age is rising.
    20 pointsBadges:
  • ToddN2000
    For me it's scary to see all the investment going to the innovations of tomorrow when there are so many security flaws and data breaches. Fix what you have first. If you keep putting flawed product out there just for the sake of being first and end up damaging your reputation you may end up paying a lot more. Take a look at the recent Samsung phone issue...  Now they wont even let those phones on planes..... Time to get a new phone for some people and Samsung is out of the picture.
    136,490 pointsBadges:
  • ToddN2000
    Instead of trying to be first and at the forefront, fix your existing  business. With all the data breaches and security issues across many platforms, that is where I'd focus more of my attention. Being first to market is not always the best thing. Take a look at the recent Samsung phone issue. Now those phones are not allowed on airplanes.. It may have caused damage to the company brand and now they may have lost a good portion of their customer base. The other advancement that scares me is self driving cars.. We are hear some stories of them having accidents and have seen reports of how they can be hacked. Fix the security before it becomes a mainstream nightmare and kills people.

    136,490 pointsBadges:

Forgot Password

No problem! Submit your e-mail address below. We'll send you an e-mail containing your password.

Your password has been sent to:

Share this item with your network: