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IBM flash storage and cloud rare revenue bright spots

While IBM’s revenue dropped for the 21st straight quarter, its storage business proved a bright spot. Following its own 22-quarter slump, IBM storage is now on a two-quarter winning streak.

During IBM’s Tuesday evening earnings report, executives said storage increased 8% over last year. That comes on the heels of a 7% increase in storage revenue for the first quarter after more than five straight years of storage sales declines.

IBM attributed the storage turnaround to double-digit percentage growth in all-flash array sales, with gains coming in midrange and high-end platforms.

Storage is part of the IBM Systems Group that generated $1.7 billion in the second quarter, down 10% year over year. The systems group also includes mainframe Z Systems and Power Systems.

“This is the second quarter in a row with growth in storage…mainframe and storage margins grew year-to-year and power margins improved sequentially,” said Martin Schroeter, IBM’s CFO.

IBM’s overall revenue came in at $19.3 billion for the second quarter, down 5% year-over-year and 3% based on the constant currency.

IBM flash storage is tied to use cases for IBM Watson cognitive computing technology for big data applications. During a February interview with SearchStorage, IBM storage GM Ed Walsh described the vendor’s storage strategy as “flash first.”

Is cloud a bright spot for IBM?

IBM also is making significant headway with cloud revenue. During the earnings call, Schroeter said the company’s cloud revenue “on a trailing twelve month basis” is more than $15 billion, which is 20% of IBM’s revenue. The company won several major customer deals during the second quarter.

“For example, Lloyds Bank has chosen the IBM cloud,” Schroeter said. “We signed a 10-year cloud agreement valued at around $1.5 billion. We’ll move the back to the IBM cloud and migrate their application suites to this infrastructure.

“American Airlines is also using the IBM cloud as the foundation for this broad-based cloud transformation. American Airlines announced this quarter they will move to the IBM cloud and use it as the foundation for their digital transformation,” he said. “They will migrate critical applications, including AA.com, their customer-facing mobility app and their global network of kiosks.”

IBM also signed a $700 million agreement with Bombardier.

“We’ll move them to the IBM cloud and help integrate their operations globally,” Schroeter said.

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