Businesses buy more speciality MIPS, but IBM Power fails

Q1 revenue in IBM's server hardware business crashed due to poor sales of Power-based Unix systems

IBM's server hardware revenues crashed in the first quarter of 2013 due to poor sales of Power-based Unix systems.

Revenue in its hardware business fell by 17% to $3.1bn, its mainframe business grew by 7%, while the Power (Unix business) dropped by 27%, compared with the same period last year.

Overall, the computer giant reported revenue of $23.4bn for the quarter, down 5% compared with 2012.

In a transcript of the earnings call posted on the financial blogging site SeekingAlpha, IBM’s chief financial officer Mark Loughridge noted a boom in the company’s speciality processors for the mainframe, which enable businesses to offload certain workloads on System Z hardware to save on licensing costs. 

“MIPS were up 27% and more than half of the MIPS were from speciality engines, which were up more than 65%. Within that, Java was up 70%, database 24% and Linux nearly doubled,” he said.

Commenting on the poor performance of the Power (Unix) systems business, Loughridge said: “Power revenue was down 31% at constant currency. Our declines were driven by both the high-performance computing segment, where we had a strong performance last year, and the impact of the transition to POWER7+.”

He said IBM would be expanding its Power platform to go after the Linux opportunity. 

“We’ve already had some key successes with wins this quarter in China and in Europe, and in fact Watson is based on Power Linux. Though this will take time to mature, it provides a real opportunity for future growth,” he added.

IBM reported flat software revenue of $5.6bn. Revenue from its WebSphere middleware family of software products increased by 6% year on year, Information Management software decreased by 2%, Tivoli software increased by 1%, Social Workforce Solutions (formerly Lotus) software increased by 8%, and Rational software decreased by 2%.

Revenue in its services businesses declined. Global Technology Services revenue was $9.6bn, down 4%, while Global Business Services revenue was $4.5bn, down 3%.

Read more on Data centre hardware