IBM's overall third quarter for 2010 shined as the company delivered $3.6 billion in net income over the previous year's $3.2 billion, a 12 percent increase. Total revenues, though, for the third quarter of 2010 were just $24.3 billion, a modest 3 percent increase from the third quarter of 2009.

"In the third quarter we grew revenue in our hardware, software and services businesses, expanded margins and again increased earnings per share at double digits," reports Samuel J. Palmisano, IBM chairman, president and chief executive officer. "We achieved excellent performance in our growth markets unit, reflecting sustained investments through the downturn and the continued strength of the infrastructure build-out in these countries.

"Looking ahead, we are uniquely positioned in the enterprise, investing in high value segments like business analytics, advanced systems and smarter planet solutions. As a result, we are confident we can deliver strong business performance to grow profit, return value to our shareholders and to achieve full-year 2010 diluted earnings per share of at least $11.40."

And Power Systems revenue? Down 13 percent.

Beyond the Investors

Looking past the financial investor speak, how did IBM's hardware business fare overall, and more importantly, how about that 13 percent decline in revenue for Power Systems? 

Mark Loughridge, IBM’s Senior Vice President and Chief Financial Officer, Finance and Enterprise Transformation executive, reported to Wall Street during a conference call with investors in which he revealed a little Power spin.

"Systems and Technology revenue was $4.3 billion, up 10 percent year to year or 11 percent at constant currency. Revenue was driven by double-digit growth in System z, midrange Power, System x, disk storage, and Microelectronics," Loughridge said. "We had very strong performance in the growth markets, up 25 percent at constant currency. BRIC countries grew over 40 percent, with double-digit growth in all brands."

More specifically, "System z revenue grew 15 percent year to year and gained share. MIPS grew 54 percent, the highest growth in six years. Late in the third quarter we shipped the zEnterprise 196 server which delivers 40 percent more performance than the z10. This performance is driven by the world’s fastest processor, which operates at more than five gigahertz. In the fourth quarter we will begin shipping the zBX, IBM’s first System of Systems. zBX extends mainframe governance to select Power7 and System x blades," he reported, diving next into the boxes we really care about.

Limited POWER7 Shipments

"Power Systems revenue declined 13 percent year to year and continued to be the market leader by a wide margin. We first introduced Power7 into the midrange during the first quarter and in the third quarter midrange systems grew 11 percent. We continued the roll out of Power7 with the high end and entry products in mid-September. Shipments were limited though, with just two weeks of general availability in the quarter," Loughridge noted. 

Still, he added, "Our competitive take-outs continued in the third quarter. We drove over 250 competitive UNIX displacements, which resulted in approximately $225 million of business." 

Nice. 

As for the remaining hardware segment, Loughridge reported, "Storage hardware revenue grew 7 percent year to year, or 8 percent at constant currency, and held share. Storage revenue in our growth markets was up 23 percent. Disk grew 14 percent, driven by continued strength in high-end storage, DS8000 and XIV. We added more than 130 new customers to our XIV platform in the third quarter and XIV hardware revenue nearly doubled. Tape declined 8 percent but gained share this quarter. Taking a broader look at our storage performance, our storage hardware, together with storage software grew 10 percent." 

And System x? 

"System x revenue grew 30 percent year to year and gained share. This is the fourth consecutive quarter of year-to-year revenue growth of 30 percent or better. The high end of System x was up 27 percent and gained share," he said, adding that microelectronics OEM revenue was up 28 percent year to year on strong revenue growth from IBM's OEM customers in networking and wireless communications infrastructure.

Best yet, for the overall quarter, IBM's Systems and Technology group delivered double-digit revenue growth, expanded margins, and grew profit 46 percent.