When IBM reports its quarterly financial performance to Wall Street, the most interesting Power Systems nuggets don't come from the press releases or official reports, they come from IBM’s Senior Vice President and Chief Financial Officer Mark Loughridge in his conference call presentation to investors. In this call, he delivers the highlights and sometimes alludes to new action on the horizon that might affect performance.
Overall, IBM delivered $23.7 billion of revenue for the second quarter of 2010, which is up 2 percent at constant currency, which also led to $2.61 of earnings per share, up 13 percent from a year ago. IBM has a large and varied business, but we like Power Systems, so that's where our coverage will focus.
"We’ve been investing to extend our technology leadership," Loughridge told investors and analysts. "Earlier this year we introduced POWER7 technology to our midrange UNIX servers, and this quarter the midrange grew 11 percent, which resulted in four points of share gain in Power Systems. In the third quarter, we’ll have POWER7 across our entire UNIX product line, and will introduce and ship our next generation mainframe solution."
Upon closer inspection, however, Power Systems revenue only grew in the midrange of the product line, not overall.
"Power Systems revenue declined 10 percent year to year," he said, explaining, "Our new POWER7 products drove midrange growth of 11 percent, and Power blade growth of over 65 percent. This performance drove our ninth consecutive quarter of share gains."
Which, if you think about it, is a pretty way of saying that while our overall revenue declined, which we would prefer you didn't pay much attention to, our new midrange UNIX systems sold well and did better than the competition.
Taking Out Sun
"In second quarter we had 225 competitive UNIX displacements of which almost two-thirds were from Sun," Loughridge said. "This resulted in $225 million of business and nearly 4 points of share gain. This is a sequential increase of over $75 million from the first quarter where we gained over seven points of share. We have now won 620 deals from Sun totaling nearly $650 million over the last 6 quarters. The win rate has been increasing and we expect these take-outs to continue throughout the second half."
Ouch. That's a nice big public slap, eh? But here's the more interesting news:
"This quarter we will announce our POWER7 entry and high-end systems with availability in September. Our high-end systems will scale up to 256 cores and are capable of running 1,000 virtual images, which is 4 times more than our current high-end POWER6 processors. Additionally, the energy efficiency of these new high end systems will be five to seven times more efficient than the latest UNIX systems from both Sun and HP," he said.
Nice. Most industry watchers were expecting a 3Q announcement to round out the entry and high-end Power Systems line, in advance of major 4Q budgeting and buying action, but it's nice to know they'll be available by the middle of September.