IBM announced its first quarter earnings for 2013 ...

IBM announced its first quarter earnings
for 2013 , reiterating its earnings guidance
for the year. Bearing in mind my previous
cautions about not reading too much into
one quarter or into one segment of the
global mainframe ecosystem, IBM's
zEnterprise server business performed
quite well, growing 7% year over year
(8% at constant currency). Any growth in
the server business these days is highly
likely to be a marketshare gain, and so it
was with zEnterprise. Yes, that's correct:
IBM mainframes are gaining substantial
marketshare in the server market.
IBM's CFO added a few comments to give
some color to that performance. One
comment was that "MIPS" deliveries
galloped ahead faster (27%) than the
growth in revenue, so that means
customers continue to enjoy progressively
lower prices when they buy mainframe
capacity. He also pointed out that
speciality engines are continuing to
perform well, too, reinforcing the fact
that mainframe customers continue to
place new applications on mainframes at a
brisk pace. And he mentioned that
several large mainframe sales got pushed
into the second quarter, perhaps due to
the unusual timing of the Easter holiday,
so IBM is expecting a further increase to
double digit zEnterprise growth in the
second quarter.
Overall, though, IBM's hardware business
had a tough quarter. One surprise (to me,
anyway) was IBM's Power server business
which declined 32 percent. There were
several comments about that statistic.
One is that IBM is overwhelmingly #1 in
the UNIX server market and still probably
gained marketshare — that gives you
some idea how horribly Oracle/Sun and
HP are doing in the same market
segment. Also, IBM had a somewhat
tepid quarter in their so-called "growth
markets," and 20% or more of IBM's
business in those markets is hardware, a
lot of which is Power-based. There were
also some model cycle effects as Power
servers are transitioning to POWER7+
processors. IBM said they'll be increasing
their efforts to promote Linux on Power
in order to try to win a greater share of
the Linux server market to add to their
dominance in the UNIX market.
IBM's CFO noted that the PureSystems
are doing quite well. In fact, IBM's CFO's
comments would indicate they're selling
in much greater numbers than the Oracle
"Exa" systems, probably because they're
more open and flexible, providing direct
support for a much wider range of
industry applications while also delivering
the benefits of integration. (The new IBM
PureData System for Analytics, featuring
Netezza technology, is the PureSystem
model most relevant to zEnterprise
customers.) However, the growth spots in
the quarter (zEnterprise and
PureSystems) were not enough to offset
the overall decline (14%, excluding IBM's
divested Retail hardware segment) in
IBM's total hardware business.
In his comments to analysts, IBM's CFO
pointed out how storage is changing, with
more content and value in the software
used to manage storage. (IBM's storage
software business was up more than 10%,
he pointed out.) To which I would add
that trend is true for all types of
hardware, and I've mentioned that
before. It doesn't mean you can't do
without hardware — far from it — but
getting the combination right is critically
important, and how you do the
accounting is much less important.
Likewise, I would caution cost-focused IT
organizations (which is almost all of them)
not to concentrate much on hardware
costs. The other parts of IT, notably
staffing, continue to increase as a share of
spending. Ignore those and your bottom
line is in peril.