back to article IBM storage revenues sink: 'We are disappointed,' says CEO

IBM's storage revenues are continuing to slump, with the latest overall IBM results causing the abandonment of a long-term earnings/share goal. IBM's overall revenues for its third 2014 quarter were $22.4bn, down six per cent year-on-year and down 8.2 per cent sequentially. Net income was $3.5bn; it was $4.1bn in the previous …

  1. Anonymous Coward
    Anonymous Coward

    One more Quarter

    like this wall street will be all over it for a split. If you can't split the stock, split the company...

  2. Joerg

    IBM managers are thieves!

    They are selling the microprocessors/high-end super computers CPUs unit and factories at an ultra cheap price that it's just plain insane!

    They destroyed IBM in a very short time, they sold all its top-notch units. IBM had the best CPUs way more advanced than what Intel is able to do.. a good reason why when there were good managers at Sony willing to create top-notch products they co-developed the Cell CPU with IBM for the Playstation3 (but nowadays Sony too is full of thieves controlling the group and wasting time, money and resources like never before).

    These managers are thieves! Just plain criminals like bankers! They all deserve to be put in jail!

    1. Jim Mitchell Silver badge
      WTF?

      Re: IBM managers are thieves!

      They are not selling the "microprocessors/high-end super computers CPUs unit". They are selling the fabs that made such processors, with a commitment from Global Foundries to manufacture them. There is a big difference.

    2. MadMike

      Re: IBM managers are thieves!

      Or maybe you got it backwards, and the IBM hardware is not that good as you imagine? For instance, you talk about the CELL processor. Well, you need 13 (thirteen) CELLs at 3.2GHz to match one single SPARC T2+ at 1.6GHz in string pattern matching. The CELL cpu used heavy optimizations (loop unrolling, etc) and the SPARC cpu implemented a school book algorithm in C, and still it was much much faster.

      Maybe that is the reason nobody uses CELL today, and it got killed off? I mean, why kill a success? You only can failures, not successes. But due to heavy marketing people believed CELL was fast. Well, it wasnt.

      For the IBM POWER6 cpu, you need fourteen (14) cpus at 4.7GHz to match four SPARC T2+ cpus in official SIEBEL v8 benchmarks, just read it. Maybe the POWER6 was not that good either.

      1. PowerMan@thinksis

        Re: IBM managers are thieves!

        Here is the Oracle marketing FUD. 'Ol MadMike spewing BS. Let's show the readers right away how you lack credibility. IBM's 14 "cpus" as you call them are cores whereas the "four SPARC T2+ cpus" are sockets. Each socket has 8 cores for a grand total of 32 cores. See for yourself http://www.oracle.com/us/solutions/benchmark/apps-benchmark/siebel-8-14000-pspp-on-solaris-twp-166395.pdf

        Where are some other T2+ benchmarks by the way? You are hanging on by a thread. Why did you jump into a Storage discussion to start discussing Sun SPARC vs IBM Power6? I could ask if you wake up feeling dirty, if you hurt animals as a child, if you live alone.....sadly, its obvious what the answer is. Get a life.

  3. Riku

    As one of the last remaining LTO drive manufacturers, I wonder what it could mean for LTO.org? Quantum already fit IBM drives by default and there have been lots of job changes from HP's LTO group (if the LinkedIn data is any guide).

    1. The_Captain

      People still use LTO?

  4. Anonymous Coward
    Anonymous Coward

    And they were doing so well selling NTAP as N-Series. Then they lost focus and interest, found out that people wanted N more than the other offerings, including XIV, and that was the beginning of the end. IBM pitched N-Series as NAS but people still bought it as SAN because they didn't have a master purchasing agreement with NetApp but did with IBM so buying it was easier even if IBM support sucked. IBM never did like that. Eventually they stopped the N-Series whilst leaving the door open for IBM consulting to sell native NetApp. Not one part of their storage strategy makes any sense. Bizarre. RIP storage devision, ye shall not be missed.

  5. Matt Bryant Silver badge
    Meh

    IBM sell their storage arm? Nah.

    I suspect IBM will be lining up sacrificial scapegoats for the bad performance but I suspect they would hold off on ditching storage even if it was just breaking even. Storage is needed for IBM to claim they are a rounded enterprise player - no storage offering makes IBM vulnerable to competitors that can offer combined server and storage deals such as hp, Fujitsu or Lenovo. We might see a reduction in IBM's internal storage designs and an increase in badging of OEM products instead as that pushes a lot of the costs onto the OEM and allows the axe to be swung freely in IBM's internal storage teams.

    1. The_Captain

      Re: IBM sell their storage arm? Nah.

      Matt, I agree that IBM will probably hold off on ditching storage, at least the lines that are complementary to the host environments where they’re a major player. For instance, as long as they still sell iSeries (AS/400), pSeries (AIX) and most importantly zSeries mainframes (where they pretty much have a monopoly on the CPU and OS) they'll continue to sell the DS8000 line, updating its processors, memory and drives every half decade or so, like they have been since the late 90's. I would think R&D costs have long been amortized and the cost of goods are either commodities (drives, SAS Controllers, disk shels) or they’re common to the pSeries (processors, memory, etc). So their margins must be good with the DS-8000 line and the cost of keeping it around low.

      I wouldn’t expect any huge innovations in the DS-8000, as they’d probably rather have highly desirable enterprise capabilities not be array based but live up the stack in the host (pSeries and zSeries), operating system (AIX and z/OS) or applications (DB2, WebSphere, etc). And if doesn’t / can’t fit in any of those places, it’d make sense to put it into SVC. Speaking of SVC, given a dollar of R&D budget in their storage lineup for innovation and net new capabilities, I think they’d put at least 90 cents of it in the SVC R&D budget. This would be cheaper than developing for each of their disparate storage systems (Storwize, XIV, TMS, DS, etc, etc, etc).

      I don’t agree that they’ll be OEM’ing storage from any other players, given their recent history divorcing NetApp and shedding off low margin and hardware business units. They’ve realized that servicing someone else’s product has high support costs, low customer satisfaction and contention / cannibalism with the OEM. I think instead, they’ll look to rationalize and / or integrate some disparate storage lines from all the acquisitions they have made (Storwize, XIV, TMS, etc).

      I believe they’re on a longer term transformation just as Ginn Rometty said during her earnings call. When a company that has over 400K employees all over the world and $100B in sales, it’s tough to change, takes a long time and there’ll be some grim quarters along the way. I actually worked at IBM in the early to mid-90’s and things were bad then as well then Lou Gertstner came in and transformed IBM. It’s the companies who aren’t willing to go through these tough multiyear transformations that aren’t around in the long run.

      I think IBM transformation’s success will be apparent in 3 years or so and it’ll be quite binary with either: A) IBM well positioned to be the market leader of cloud based business services or B) IBM will follow HP and split up, into 3 or 4 companies instead of two, like HP.

  6. Mr. A. N. Onymous

    Just about the only bright side to this announcement is IBM backing away from the horrible Roadmap 2015 plan. Over the past several years the cuts have been so deep inside the company that they have damaged IBM's ability to succeed. Terrible cycle. Hoping against all logic that this will yield a better long-term growth plan.

    1. Anonymous Coward
      Anonymous Coward

      To paraphrase: "Your mind is writing checks your body can't cash." (Top Gun) How anyone can make hard and accurate revenue and profit predictions in the technology sector that far out is beyond me.

    2. Rob Isrob

      The hollowing out is well underway

      Haven't goggled it, but that wasn't a five year plan perchance? Five year plans don't work out so good. Heh. Problem with some of these larger companies, they lack elasticity. They can't change fast enough and/or they mis-interpret the change around them and head off in a direction and land some place the industry isn't going. High-end monolithic storage arrays on the decline... "hmmm... what does that mean? Where should we be heading?" etc. As Potts quotes Jobs: As the much-venerated Steve Jobs said: "If you don't cannibalize yourself, someone else will." I wouldn't suggest for a second this is easy, some will get it right others will shore up the walls for a time being and speak good wall street babble on earnings calls until it becomes quite clear they have been hollowed out and there is considerable erosion behind the walls. The "two for one" spends that Amazon, Google, FB, MS are employing are having a devastating effect on IBM,HP and other traditional players. Borrowed that last bit from Campbell, here: http://storagemojo.com/2014/10/17/shadow-it-pt-2/

      1. El Storage Master

        Re: The hollowing out is well underway

        Great Steve Jobs quote for this situation. It rings true with legacy disk-based storage and the vendors that still profit off of it, and try to cling on and not cannibalize it. EMC, Hitachi, NetApp, HP, and Dell are all in this category. Lot's of money being made still on disk and the SW that runs it, and the years out maintenance, etc. Does IBM also want to remain in that category of trying to cling on to the past for fear of cannibalizing the legacy install that they have? I am not sure they do and I am not sure they don't know it. The TMS acquisition, and its current growth trajectory, seems to be taking them towards cannibalization faster than any of the Big Six vendors, while companies like EMC and Hitachi are going to the middle form factor slowly to preserve appearances in the data center. If they (EMC, Hitachi, NetApp, etc) go too fast they fear, that means their disk will look really out of place compared to the tiny flash arrays of TMS and Violin, and that will be bad for business. If 5 big oligopoly-like vendors all have strategies to go do the middle slowly, IBM may really do something disruptive by being 1st to cannibalize. The latest Gartner report for all-flash arrays show IBM now has market share lead at 25%. I would argue that IBM is ready to cannibalize and disrupt the other 5. The fast and small plumbing will win the OpEx wars now that the flash CapEx has drastically lowered. Violin and Pure are getting this message out and people are listening. They are too tiny to disrupt the Big 6 though. IBM is not, and they might already be humming to the tune of this Steve Jobs' quote. Let's see how far they are willing to take this flash thing.

  7. Speltier

    whisper words

    If you want to know how an old line company is doing, compare year to year aerials of the company parking lots. The ones with research and development workers, not suits.

    And be sure that the company is still there -- a lot of parking lots are ex-IBM now, which can throw off the results, along with a percentage who work remotely.

    If there aren't any workers, there probably won't be a future product no matter what the suits claim. Reselling isn't a high margin business so the net result is.... corporate decline. It will take longer than you think, just look at HP. Still undead despite living solely on printer ink for a decade-- works until those ink patents expire.

    1. ecofeco Silver badge

      Re: whisper words

      Exactly, Speltier. Exactly.

  8. Stephen McLaughlin

    I like IBM Storage so hope this isn't a long-term downward trend. I would say by far the easiest to manage from a SAN admin perspective. There is overhead (SVC) cost, but the flexibility is amazing. You can migrate storage from one DS8xxx unit to another with just a few mouse clicks and it's completely done in the background with the user community unaware.

    1. Man Mountain

      I've never understood firstly why anyone still buys ds8000, but especially why you'd spend all that money on an enterprise array to dumb it down behind Svc!

    2. Ken 16
      Unhappy

      yes, technically great stuff, their remote mirror options are wonderful and they can be tuned at design time to really perform with decently sized data sets (not the Big Data thing but multiple active Terabytes).

      Hard Drives, Printers, Personal Systems Group, System x, Processors, Storage.

      Hardly an IT company any more, never mind being THE IT company. :(

    3. Anonymous Coward
      Anonymous Coward

      Obviously, you're not the guy paying the bills.

      Why would you spend so much money on DS8000's and then spend gobs more money to put SVC in front of them?

      Ah yes, you're an IBM shop. Right.

      And therein lies the issue: IBM doesn't sell storage. IBM customers buy IBM storage.

  9. Anonymous Coward
    Anonymous Coward

    IBM’s self-liquidation

    " During the 31 quarters since the end of 2006, IBM has spent $111 billion on share buybacks and another $23 billion on dividends. And it goes without saying that this staggering total of $134 billion, which was pumped into the coffers of the fast money traders who rent Big Blues shares and the mutual fund and institutional investors who index them, did accomplish wonders for its stock price... "

    http://davidstockmanscontracorner.com/the-canary-in-big-blues-mainframe-why-ibms-q3-bust-marks-a-turning-point/

    by David Stockman • October 20, 2014

  10. Anonymous Coward
    Anonymous Coward

    Reality vs Lip Service

    It's a pretty ordinary place to work, we keep being told the customer is the priority, then having onerous processes or reporting added and spending and travel freezes dropped on us regardless of the damage it does to our ability to meet customer commitments. Shareholder > Customer > Employee.

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