IBM Announces 1Q2011 Earnings: Mainframe Up Big Again

After IBM reported a blockbuster 4th quarter for its System z mainframe hardware business, IBM delivered another impressive quarter. The company's System z revenues grew a whopping 41 percent year over year in the first quarter. MIPS shipments grew 34 percent, the biggest first quarter growth rate since 2004.

Wow.

As I've mentioned previously, that's just the hardware business. IBM and numerous other vendors, small and large, make up the mainframe supplier ecosystem. IBM does not report System z-related software and services revenues separately in its financial statement. Nonetheless, the hardware report means that System z aggressively gained marketshare.

So about that difference between revenue growth and MIPS growth: does that mean the price per MIPS is rising? The short answer: probably not. IBM started shipping the z BladeCenter Extension (zBX) in September, 2010. That's the hardware that houses blade servers for direct attachment to the z196 mainframe. In the past you would buy the main chassis (containing your MIPS), and you might buy a BladeCenter chassis plus some blade servers. IBM would count the MIPS as System z hardware revenue, and IBM would count the BladeCenter and blades sales as Power, System x, and/or software sales. Now, when you buy a zBX, that revenue gets reported as System z revenue, even though you're not buying IBM MIPS. (Power and X86 blades aren't measured in IBM MIPS. They're measured using other metrics, like rPerfs.) In other words, the definition of the mainframe has expanded and now includes both IBM MIPS and non-IBM MIPS (like rPerfs).

IBM's other server product lines did quite well, too, gaining marketshare. And once again IBM is reporting what you might call a "flight to high-end servers." As virtualization and cloud computing become ever more dominant, and as other server vendors struggle, IBM seems to be reaping the benefits with its System z and high-end Power product lines, in particular.

Case in point: Canada's Payment Solution Providers. PSP is consolidating its entire HP- and Oracle-based infrastructure onto a System z10 BC with z/OS and DB2. Why? Security (including easier PCI compliance), scalability, and cost savings. PSP provides cloud-based credit card services.

by Timothy Sipples April 20, 2011 in Economics
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Good write up

Posted by: Iphone Application Development | Apr 21, 2011 6:59:10 AM

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