IBM: Signs of weakness?
At a first look it looks like a good Q3 for IBM, but it seems, that my point about IBM is correct: It´s a consulting company with a associated hardware workshop. To cite TPM from the ITJungle( citations from his articles when not stated otherwise):
IBM's Global Services group not only filled in the revenue gaps left by the hardware business, but cost controls allow the services business to drive a 25 percent increase in profits. (When is the last time this happened? When was the first time, in fact?) Global Technology Services had sales of $9.1 billion in the quarter, up 12.8 percent, while Global Business Services had sales of $4.6 billion, up 15.9 percent. Total services sales were up 14 percent to $13.7 billion in the third quarter.
But there are several signs of weaknesses: The Power6 line is still not complete. The p570 in it´s two incarnations isn´t exactly a product line, and we can only speculate what´s holding back in rolling out the processor throughout all systems. I would assume problems in having a decent yield of this chips.
I really think, that we have driven IBM into the corner in the last year. There was only a short window to announce Power6 in the light of Sun Enterprise M-class launch and the UltraSPARC T2 launch. They had to launch the chip. Especially when you want to make the “We´re the fastest” statement.
It seems that they announced Power6 too early to get the marketing thunder. They announced Power6 without having a line of systems ready. But it´s like with with last years model when buying a car. While a perfect car with less problems, nobody wants it. Nobody wants the old gear Thus the Power6 announcement hurts the Power5+ sales. Fujitsus distributor FSC made the same mistake from my perspective: They talked too early about the M-class, hurting the Primepower sales. FSC paid for this error with market share. And now IBM pays for this early annoncement in the same way: </blockquote>
the single Power6-based server that IBM is selling helped out the System p midrange Unix server business, which rose by 26 percent in the quarter, according to Loughridge, but overall System p server sales only grew by 6 percent.</blockquote>
A classic case study for the Osborne effect. As the ITjungle reports, IBM reacts with with price cuts (again by TPM. Timothy, by the way, don´t city TPC-C for performance comparisons, ruins the credibility ;) )
To close this article:
System z mainframe sales, which have been growing for eight consecutive quarters, took a dive, with sales down 31 percent (34 percent at constant currency, showing how the dive was steeper in the United States) and MIPS shipments falling by 21 percent in the quarter.</a>The cash cow for IBM had some problems, too. A drop of 31 percent at this point is a really bad message.