How IBM’s System and Technology Division Performed in FY14
IBM's 4Q and FY14 Earnings: Transition Has Yet to Yield Good Results (Part 3 of 17)
System and technology revenues continue to disappoint
In 4Q14 and fiscal year 2014, IBM’s (IBM) system and technology division revenues stood at $2.4 billion and $10 billion, a decline of 39% and 23% on a year-over-year basis, respectively. Divestitures of its x86 server and its microelectronics segment as a part of the company’s strategy to shift its focus towards higher value IT (big data, analytics, mobile, security and cloud services) impacted revenue growth.
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Server and storage continue to reel under pressure
In 2014, revenues from POWER Systems and System z mainframe server products declined ~19% and 23.2% on a year-over-year basis, respectively. System Storage revenues also declined by 12% on a year-over-year basis. IBM aims to reposition its POWER systems through the development of the POWER8 systems meant for cloud and big data. The company pushed the POWER8 architecture through the OpenPOWER consortium to build an open ecosystem and an IP opportunity. We’ll discuss this IBM initiative in detail in a later part of the series.
The decline in revenues of these divisions raises concerns as IBM is aggressively pushing analytics that require computing and storage infrastructure. As the company refreshes its power and systems product line, it expects improvement in revenues in this segment.
We have already seen in the earlier part of the series that IBM lost its title of market leader in the server space to HP (HPQ), especially after the sale of its x86 servers to Lenovo. Oracle (ORCL) and Cisco (CSCO) are other leading players in the server market.
If the storage, mainframe, and outsourcing business units continue to decline, it will impact IBM’s ability to provide cloud, analytics, and back-end infrastructure.
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