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Poor storage sales give IBM the blues

IBM storage revenue declined for the 10th straight quarter, yet the results disclosed Wednesday night were hardly business as usual for Big Blue. IBM’s 23 percent year-over-year decline in storage was a much steeper decline than the normal drops in the six percent to 12 percent range.

When IBM sold its x86 server business to Lenovo in January, industry watchers wondered what impact that would have on storage because server sales often drive storage sales. It’s probably too early to blame the full drop in storage revenue on the server divestiture. Perhaps the more disturbing big-picture trend for IBM is that all of its major hardware platforms declined significantly last quarter.

CFO Martin Schroeter said IBM’s flash storage revenue grew, but high-end storage revenue fell substantially. That would be IBM’s DS8000 enterprise array series that competes mainly with EMC’s VMAX and Hitachi Data System’s Virtual Storage Platform (VSP).

There has been speculation since the Lenovo server sale that IBM would divest its storage hardware business, but Big Blue isn’t throwing in the towel on storage yet. Schroeter said the vendor has taken actions to “right-size” the storage business to the market dynamics, which likely means cutting staff and product lines. IBM is expected to launch upgrades to its DS8000, Storwize and XIV platforms over the next few months, and has promised further developments to its FlashSystem all-flash array line.

“IBM will remain a leader in high-performance and high-end systems, in storage and in cognitive computing and we will continue to invest in R&D for advanced semiconductor technology,” Schroeter said.

IBM’s storage software was a different story. IBM said its Tivoli software revenue grew seven percent and increased across the storage, security and systems management. Security was the big gainer there with double-digit growth, which means storage software likely increased less than the overall seven percent. Still, compared to IBM’s storage hardware, Tivoli storage software is booming.

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