Is IBM’s storage business doomed?
IBM’s vestigial hardware business – 15.5% of Q4 company revenue – continues to slide. This won’t end well.
In its Q4/2013 earnings call, IBM’s profits were higher than forecast, but revenues were lower. Hardware was the major culprit.
Total Systems and Technology segment sales were down 26% and profits were down 79% year over year. They don’t break out server shares, but the System x – as in x86 – business that they sold to Lenovo was down only 16% compared to mainframes – down 37% – and Power Systems – down 31%.
Storage did the best, declining only 13% to about $950 million. I’d expect their margins to be good – 60% – unlike the low-end server business. Here’s the slide from their Q4 call:
Margin drives allIBM’s margin concerns led to the sale of x86 business, just as earlier concerns over disk, enclosure and printer margins led to those sales. We’re seeing a long, slow, going out of the-hardware-business sale.