System z Wins IBM Platform Financials Race

The tension that has been dogging IBM since the 1Q 2013 financials eased a bit Wednesday with the release of the company’s 2Q 2013 financials. The financial analysts had been nervous following the company’s first quarter’s downer financials.  IBM has been pivoting as hard and as fast as it can to stake out the cloud, mobile, social, and analytics in pursuit of where it believes future revenues will come from.   You can’t attend an IBM conference, event, or briefing without these big three—cloud, mobile/social, analytics—coming up.

Not surprisingly the IT financial analyst community, as observed from the sidelines, has been uneasy to say the least since 1Q 2013.  They didn’t see big revenue flowing in from those markets very soon or from any others. So, with IBM 2Q 13 results many were surprised.

Granted, it wasn’t IBM’s best quarter, for sure, but there was enough to cheer about. Just a sampling starting with operating (non-GAAP) results, including workforce rebalancing charges: Diluted EPS: $3.22, down 8%; including workforce rebalancing charges; Net income: $3.6 billion, down 12%; including workforce rebalancing charges; while Gross profit margin: 49.7 percent, up 1.4 points.

The real cheering, however, comes when you look at the performance of the various platforms.  Systems and Technology (STG) revenue down 12 % (down only 11% adjusting for currency).Total systems revenues, excluding RSS, decreased 10% (down 9 %, adjusting for currency). Revenues from Power Systems were down a whopping 25% compared with the 2012 period. Even revenues from System x were down 11%.

The bright spot for STG, it turned out, was the mainframe! Revenues from System z server products increased 10% compared with a year ago (up 11% adjusting for currency). Total delivery of System z computing power, as measured in MIPS increased 23%, which tells you that IBM is packing more MIPS into each new machine it sells (zEC12 cores provide more MIPS for lower cost/MIPS than previous machines, same with specialty processors).

Beside the System z results, the other big platform news was the hint of a big divestiture.  Everyone automatically assumed it referred to the System x business. Stay tuned.

DancingDinosaur expects next quarter will be as good if not better for the z.  For months, DancingDinosaur has been telegraphing the arrival in 2013 of a new business-class version of the zEC12 here and here, a z114 equivalent for the zEC12.  If it arrives next quarter, it should give a kick to z sales for the next couple of quarters, at least.

An interesting tidbit that crossed DancingDinosaur’s desktop:  a recent survey conducted by Compuware suggests that a technology performance failure can cost an organization, on average, about $10M in short-term costs business-wide, from operations and sales and marketing to finance and distribution/supply chain. And that’s even before longer-term consequences, such as loss of market share, erosion of brand equity, and damage to reputation are accounted for.

Not surprisingly, Compuware’s recently enhanced Abend-AID fault management tool addresses this, making it easier for staff, especially those unfamiliar with mainframe legacy systems, to find, analyze, and resolve application failures fast before the costs start mounting.

If you have conducted interesting surveys and studies feel welcome to pass them along to DancingDinosaur.

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