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4/23/2009
11:55 PM
Bob Evans
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IBM CFO: We Had 62 Unix Competitive Displacements In Q1

Earlier this week, IBM reported declines in many parts of its hardware business. But in spite of the broad hardware downturn, CFO Mark Loughridge said IBM convinced 62 CIOs to rip and replace Unix systems in the quarter, and that Linux MIPS were up more than 50%.

Earlier this week, IBM reported declines in many parts of its hardware business. But in spite of the broad hardware downturn, CFO Mark Loughridge said IBM convinced 62 CIOs to rip and replace Unix systems in the quarter, and that Linux MIPS were up more than 50%.As my very excellent colleague Paul McDougall reported in his IBM-Oracle-Sun analysis, "Big Blue's report showed that the market for servers and other types of computing hardware in which Sun specializes has dried up across the board amind the recession." True enough.

And as Loughridge mentioned a few different times during his presentation to financial analysts and subsequent Q&A, IBM has been anticipating and accommodating that shift in its revenue mix for several years, with all of its first-quarter profits coming from segments other than hardware: software, services, and financing.

So it's compelling to see several specific details within Loughridge's overall comments about IBM's hardware performance in the quarter:

--"If you look at the specific performance in this space, our P series business picked up four points of share in the quarter." --"The high end of our business was up 35%." --"Sixty-two enterprise customers migrated to Power systems platform in the first quarter alone." Loughridge added that half of those 62 Unix competitive displacements were transactions of more than $1 million. --"MIPS from specialty engines were up nearly 20%, driven by over 50% growth in Linux MIPS." --"System Z revenue grew 37% in our growth markets, which is up 60% at constant currency."

So it is indeed a very interesting time for IBM and any other IT vendors offering servers and storage hardware. Here's the core element of McDougall's analysis of the looming competition involving IBM, Oracle, and Sun:

[Oracle's] hand may have been forced by IBM, which was engaged in its own merger talks with Sun over the past fortnight. Like a ball team that agrees to take on an overpriced veteran as part of a trade that nets a young superstar, Oracle may willingly overpay for Sun's hardware line just to get its hands on the ubiquitous Java Web development platform--and keep it from IBM's mitts.

"IBM's offer may have put a scare into Sun," notes Stuart Williams, an analyst at Technology Business Research. "Oracle has standardized its software stack on (Sun's) Java; it cannot afford to have one of its competitors own this crucial software building block," says Williams.

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