IBM Announces 4Q2010 Earnings: Mainframe Up Big

IBM announced its 4th quarter earnings for 2010. The overall financial results beat expectations, and IBM's CFO indicated that the company is on track toward its 2015 financial plan.

System z hardware had a tremendously impressive quarter as virtually all press accounts headlined: up 69 percent year to year on a revenue basis. IBM shipped 58 percent more MIPS capacity in the quarter. IBM's 4Q2010 was the first full quarter of availability for the new zEnterprise 196 model which contains the world's fastest CPU cores. IBM started shipping some of the blade server features for the z196 during the quarter as well. Sharp mainframe hardware revenue growth slightly outpaced also high MIPS growth. Server revenues grew strongly overall as well, though not quite at the blistering pace as IBM's mainframe hardware. IBM's CFO, Mark Loughridge, noted that IBM gained server marketshare again, and he said that IBM broke its previous record for migrations from Sun and HP.

IBM does not break out System z-related software, services, and financing elements of its business. However, Loughridge noted that IBM won 24 new System z customers during the quarter. Also, during the question and answer session with financial analysts (as transcribed by Seeking Alpha), IBM's CFO specifically commented on the strong System z performance and indicated that IBM expects continued momentum into 2011.

by Timothy Sipples January 19, 2011 in Economics
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Comments

Timothy,

Long time no see. Impossible to find contact information for you, so please email me. It would be great to hear from you again after so many years...15+?

Larry Salomon
Questor for information / Questor / Q

Posted by: Larry Salomon | Jan 21, 2011 12:03:56 PM

P.S. I'm assuming you can see the email address I entered when I posted that. ;)

Posted by: Larry Salomon | Jan 21, 2011 12:04:33 PM

So let's get this straight... revenue rose by 69% for a 58% growth in MIPS. "Sharp mainframe hardware revenue growth slightly outpaced also high MIPS growth".

That sounds awfully like a fudged way of saying that prices have risen.

How does this square with the much-touted "technology dividend"? It sounds like it's IBM that is reaping the dividend, and the customer (that's the rest of us) is paying for it!

Posted by: Roger Bowler | Apr 4, 2011 7:53:10 AM

In a word: no. If you follow and understand the mainframe market over time, you would be familiar with new model effects. Companies and governments buying the new z196 mainframes are, yes, typically buying more MIPS. But unlike pure MIPS purchases they are also, typically, buying I/O cards (upgrades to FICON Express 8, replacement of ESCON), crypto upgrades (CryptoExpress3), and (new to the mainframe) zBX frames with blades (which started shipping in 4Q), among other non-MIPS mainframe purchases. IBM counts all those purchases as System z hardware revenue but they aren't zMIPS.

So what market observers are looking for is a revenue growth number which slightly outpaces the MIPS growth number in these few quarters, and that's exactly what happened in the 4th quarter of last year.

The best situation for both IBM and for IBM mainframe customers is if IBM's mainframe revenues are growing, and if prices are stable or declining. That particular financial combination means that IBM would rationally continue and even increase mainframe-related R&D, and strong demand would help IBM profit from those huge R&D costs while reducing prices on a sustained, long-term basis. IBM's performance in the 4th quarter was yet more evidence that that particular recipe is exactly what's happening, which is great news for the whole IT industry.

Posted by: Timothy | Apr 6, 2011 9:51:01 AM

Well thanks for explaining that, Timothy! Obviously I had not been drinking enough Kool Aid. Now I can see that this is indeed marvelous news, and that we as consumers and taxpayers must remember to be grateful to IBM for reducing prices while at the same time giving mainframe customers the opportunity to pay increasing amounts to IBM each year.

Posted by: Roger Bowler | Apr 14, 2011 11:18:16 AM

Can we have a category for Quarterly Mainframe Performance. Then we can easily see the Quarter by Quarter performance trend for revenue, MIPS etc in addition to the blog and its comments

Posted by: Joydeep Banerjee | Aug 19, 2011 1:30:37 AM

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