A Little More Color on Power Systems i Sales in Q4
March 2, 2009 Timothy Prickett Morgan
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When you don’t tell people what’s going on, they will often just assume the worst. Especially these days, as the global economy is undergoing some intense changes. But sometimes, that is a wrong assumption, and as I have said in the past year, I think IBM‘s i platform business is not doing as badly as many people might assume from the numbers Big Blue has been putting out. Scott Handy, vice president of marketing and strategy for the Power Systems division, used to run the Linux-on-Power efforts and then AIX and Linux marketing in the formerly independent System p division. And now he has the whole ball of wax for Power Systems, including the AIX, Linux, and i operating systems, the PowerVM hypervisor, the PowerHA high availability software, various clustering products for supercomputing (including Cluster Service Manager and HACMP for AIX and Linux), and the QuickTransit application and platform emulation software, which IBM got when it bought Transitive last fall. There may no longer be an iSeries or System p division, but Handy is the closest thing we now have to an executive who actually knows what is going in with the i platform in terms of sales. While he cannot give out specific figures, Handy did give me a sense in a recent interview of what the i portion of the Power Systems line was doing in the fourth quarter of 2008, which was not exactly a great time to do business. And Handy pulled no punches about the challenges that IBM faces. “Our strategy is to get this business to stabilize,” Handy explains, conceding that in recent years sales have been in decline. Something we are all aware of. But he offered some hope, and some insight as to why IBM does what it does. “We had a record year of high-end i sales–more than we have ever seen before, in fact,” Handy says. “We had a pretty good quarter for midrange i sales, but not enough to offset low-end declines.” And, of course, low-end revenue declines are driven downward in part because Power 520 machines are less costly and deliver better bang for the buck than the System i machines they replaced last April. As I said a month ago in the wake of IBM’s fourth quarter and year end financial results, I did a little math and reckon that IBM sold some $243 million in Power Systems i and System i boxes and upgrades, down 37 percent from the $383 million in sales I estimate that the i platform did in the fourth quarter of 2007. For all of 2008, by my numbers, the situation was not so dire, with sales down only 13 percent to $887 million. It is not lost on anyone that two decades ago, the AS/400 outsold the RS/6000 by five to one, and now those positions have reversed. That said, the i platform still has an equally large–if not larger–customer base and tons of legacy applications that are hard (but not impossible) to move. As for the overall Power Systems revenues and shipments in the fourth quarter, Handy was not at liberty to give any precise numbers. “Our fourth quarter was pretty good,” he said with a laugh. “I think it is obvious that we are doing alright.” I think Power systems, regardless of operating system, accounted for just under $1.6 billion in sales, down 6 percent. Considering that according to IDC, the overall server market declined by 14 percent to $13.5 billion, as I report elsewhere in this issue, this is not too shabby. For the year, IDC reckons that server sales fell 3.3 percent to $53.3 billion, and I calculate that in 2008, the Power Systems lineup accounted for $5.2 billion in sales, down 3 percent. Power Systems is tracking with the market, or sometimes beating it. When I asked about the possibility of a refresh of the Power Systems line with a Power6+ processor sometime this year, Handy chuckled and did what every IBMer does: quote the party line. “I don’t announce future products.” True enough. But someone will, and it could even end up being me if I catch wind of anything. Don’t be shy if you know something out there. 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