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back to article IBM needs to sell its stuttering storage biz lines

IBM’s storage results are down in the dumps and we’re sure it’s in talks to sell off its server business to Lenovo. Should it sell off its storage business too? Big Blue’s fourth quarter FY2013 results gave it the blues, with the Systems and Technology Group revenues for the quarter down 26 per cent compared to a year ago. The …

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LDS
Silver badge

“We’ll acquire key capabilities, we’ll divest businesses, and we’ll rebalance our workforce as we continue to return value to shareholders.”

Where's the sentence "we'll fire our executive who weren't able to understand the business they were paid for."?

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> Where's the sentence "we'll fire our executive who weren't able to understand the business they were paid for."?

I worked for IBM for over 12 years and I'll probably have a heart attack from shock the day that happens. As it is, I'm having palpitations that they've forgone *their* bonuses. We'd had quarters and years where while revenue declined, our division was able to up our profit by being more efficient. Didn't matter. We'd still get told how we sucked and that everyone needed to sell. The only thing IBM and the execs care about is revenue. They'd crow about Global Services increasing their revenue. When you looked at the numbers you found that their profit had actually gone down because of the costs they incurred to earn that revenue.

The thing that keeps IBM in business is that it is huge. Plenty of managers doing the right thing and silently subverting upper management's direction. Those two things will keep any IBM board from being able to plow the company into the ground any time soon.

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Anonymous Coward

Come on

This author really doesn't understand IBM's systems business.

IBM STG (hardware) is much more important than you make it out to be. It doesn't appear that way on the earnings report because many components of the STG business are software and services revenue. These are systems, not hardware. For instance, purchase an IBM Power-AIX server and IBM accounts for the AIX, PowerHA, PowerVM, etc licenses as part of software group. Likewise in the storage business (DS8 software stack, XIV software stack, etc). Even more so with mainframe where you not only have the base OS stack, but CICS, VSAM, MQ, DB2 for z, etc, etc which only run on z. Same situation with System i, which is predominantly software. If you account for all the software which is tied to STG systems (i.e. included software stack), you are talking about a large and profitable business.

As a corollary to that point, IBM's independent software (IM, WebSphere, Tivoli, etc) are generally sold with the IBM systems. For instance, Tivoli Storage Manager and Tivoli Storage Productivity Center are sold with IBM storage. Not many EMC users purchase EMC storage and then decide to purchase Tivoli for storage management functions. They purchase Avamar and the EMC stack instead. If you get rid of Power, you are going to take a hit in DB2 and the rest of IM. If you sell off storage, you are going to take a hit in Tivoli.

On the services side, it is a similar picture. All services attached to IBM hardware are part of GTS (Global Services). For instance, if you purchase a DS8 and four years of maintenance and support. All of that support value is Global Services revenue. Though, obviously, if you didn't have a DS8, you wouldn't be purchasing DS8 support.

Taken in total, hardware (z, Power and storage) is a much larger business than represented on the earnings because a large portion of the revenue, and almost all of the profit, is software or services. NetApp's hardware business, for instance, would look pretty terrible too if you considered all the NetApp software/services as completely unrelated to the hardware and only looked at the P&L on the bare metal.

Having written all of that, IBM's storage is down as compared to last year and the year before for the reasons you wrote, but apparently didn't appreciate. IBM's former disk storage business had three major components DS8, NetApp rebrand (FAS - N-Series) and Engenio rebrand. IBM is no longer selling the second two pillars, so, naturally, there is going to be a transition period from OEMed to internally developed storage systems (XIV, V7000 and FlashSystem). Eventually it will be to the positive as this is all IBM IP and are generally solid systems. All three of those internally developed storage systems, XIV, V7000, and Flash, are growing by double digits.

XIV is a "niche" product with "little or no go forward." The EMC t-shirt is in the mail.... XIV has grown rapidly every year of its existence. There are many thousands of XIV full frames in the field many of which replaced EMC Symm. Hardly a "niche." It bothers me that analysts, so-called, are still just taking EMC's word for it on XIV. Even if you agree with EMC on the XIV architecture, you can't deny there is a ton of it in the field and it isn't a blip on the radar screen.

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Re: Come on

Excellent comments as you have captured exactly the essence of the big picture. Something this author and others who I have read from Reuters, WSJ and others after the earnings report do not seem to realize. They seem to think the only revenue earned from the initial product sale is what goes out the door. When I read the article my first thought was to look for the tag "Sponsored by EMC" or pick another competitor as they are the ones who would want to see IBM out of the storage, server, software and services business. I do not work for IBM but work with their products as well as products from other vendors. IBM has it's warts like any company but they are a true engineering and technology company. Their storage is very, very good. The DS8x00 family is as solid as anything from EMC or Hitachi. XIV bridges a gap the others have a hard time matching up against. V7000/V5000/V37000 are all variations of a excellent recipe and very competitive against EMC's VNX. It can become a Chevy vs Ford discussion at times on features by by and large when you can have a fair fight I see the IBM technology stack outperform EMC more times than not. I see EMC sales tactics outperform IBM more times than not - just my observations so don't take it as an indictment, just an observation. IBM's server technology whether Power or x86 is vastly superior to anything from HP, Dell, Oracle (considering RISC & x86 if they offer it). It comes back to the IP in the servers which is amazing. That delivers servers that are more reliable, efficient, scalable, flexible, often higher performing and on occasion more costly - depends on what is being compared. However, it becomes relative because the technology, especially with Power is so efficient that it takes far, far fewer resources to do the job than other platforms just smaller servers, fewer software licenses and thus the TCA and TCO gives the advantage to IBM. I could go on. Point is that IBM innovates and sells. When they sell they try to sell additional features to grow the ecosystem. Unlike Microsoft which requires a 3rd party company to product and sell a x86 computer to get their OS into a household where they then try to sell other products like MS Office. IBM tries to sell the hardware, OS, Application, services and support.

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Re: Come on

Yes, it's a very typical trend - people write about things they probably haven't touched in ages, forget going after actual facts, they only work from press releases and claims made by vendors so the 'depth' of the resulting 'analysis' shouldn't be a surprise, I think.

It's almost Thursday, cue in some of the recurring weekly gleeful praise for a startup who has yet to ship a single product but is already (supposedly) 'game changing', right after the scorn of established companies with billions spent on R&D who should just sell off their business and close shop etc...

...no offense but CM needs to get out and get dirty, do some fact-checking eg get quotes through his contacts in the field etc so he would quickly realize that half of the things he quotes as facts, lifted from press releases, are just false claims, real numbers (prices, sizes, performance etc) are pretty far from reality.

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Paris Hilton

Where's the Paris Hilton angle?

Sorry but I can't figure out the reference to (wo)man in the article.Am I missing something here?

As a side note, have you noticed how the responses from IBMers are extremely long and probably took ages to write. Methinks they have too much time on their hands these days, hmm. Or maybe they are just so used to writing bull that they don't notice.

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Happy

Re: Where's the Paris Hilton angle?

I think it's a reference to IBM's notably female CEO http://www.ibm.com/ibm/ginni/

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(Written by Reg staff)

Re: Re: Where's the Paris Hilton angle?

Indeedie. Take the headline and subhead together - Ginni Rometti is IBM's CEO.

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Couple of IBMers really feeling the need to get all defensive! So storage software like DS8000 array licenses, etc, are already rolled into the storage number so don't try to suggest that their storage numbers are underrepresented. IBM has had too fragmented a product line for too long. Yes, most vendors have multiple products, but there has been more overlap and confusion with the IBM portfolio than most others. The nSeries, DS5000, SVC/V7000, XIV and sometimes even the DS8000 have all been sold into the same space at times. IBM seems to have phases where one product is the answer, what is the question. It's been XIV but they seem quiet on that one now, with V7000 being the current trend. But regardless of how sound your logic is about a breakeven hardware business being worth being in because of the traction it provides for more profitable business lines, IBM isn't interested in hardware. I worked as a hardware salesman for IBM for over a decade and always felt that hardware was of no strategic importance to the company. Most of the xSeries guys have gone to Oracle, most of the storage guys have gone to HP, and important as Power is, it is a declining market too.

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Anonymous Coward

I agree that IBM's product line currently has many areas of overlap. N-Series and the Engenio (DS3, 4, 5) are going away though. When that is complete it will be a pretty clean product line. V3700 = entry level, V7000 = midrange, XIV = High End for Open Systems, DS8 = High End for mainframe/i and people who want the traditional tiered approach instead of XIV's grid appliance model. FlashSystem for ultra-high performance outside of the traditional disk range of products. There will be some decision points where XIV and V7000 meet... maybe between DS8 and XIV on occasion, but no more so than VNX, VMAXe, VMAX or HUSVM and VSP.

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I almost feel bad....

For how silly those IBMers above now look. I take it they were auditioning for a new job with Lenovo.

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Anonymous Coward

Re: I almost feel bad....

What a stupid comment. All the guy said is that the revenue comes in as software rather than hardware. Go into any customer and ask them, "Do you want to buy less storage with a smaller footprint than you have now, or do you want to continue wheeling in large arrays full of disks?"

IBM's strategy is no different from any other vendor's. They'd all love to continue flogging large monolithic arrays to customers but the customers would rather make better use of what they have, and what they buy in future. First we had tiered storage, then thin provisioning and now it's dedupe and compression. All of these are done in software and come with a licence, along with maintenance, services and so on.

The big difference is IBM seem to be less bothered about selling the disks and are happy to virtualise other people's. A risky strategy, especially if it leads to articles like this (which looks very much like an EMC press release) but if they've got data centres full of others' storage with IBM licences on it, would they really consider selling the storage business?

Personally I'd like to see standardised, cheap disk enclosures with no built-in RAID or other functionality other than SAS/Infiniband/whatever. Then the various vendors can put their headers in front of them. Enclosures would become commodity and therefore cheaper, and the storage vendors would have to compete with their software. Maybe this is already happening and IBM knows that.

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