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IBM Growing Server, Mainframe Business

By Sean Michael Kerner (Send Email)
Posted January 22, 2018


The last few years have been challenging for IBM, with multiple sets of market transformations underway. At long last, IBM appears to now be back on track, as evident by its revenue gain reported for the fourth quarter of fiscal 2017.

IBM announced its fourth quarter fiscal 2017 and full-year 2017 results on Jan. 18, with revenue for the quarter coming in at 22.5 billion, for a four percent year-over-year gain. Net income was reported at $4.8 billion, for a one percent improvement over the fourth quarter of fiscal 2016.

For most of 2017, cloud-related revenues were among the fastest growing areas at IBM. For the fourth quarter, IBM reported $5.5 billion in cloud revenue, a 30 percent year-over-year improvement.

Mainframes and Power Systems Revenue Grew Faster than Cloud Revenues in Q4

What was surprising in IBM's fourth quarter is that systems-related revenues, including mainframes and Power systems, actually grew faster than cloud revenues. For the fourth quarter, IBM reported systems revenue of $3.3 billion, for a 32 percent gain over the fourth quarter of 2016.

"Our systems results were terrific across IBM Z, Power and storage," Martin Schroeter, Senior VP of Global Markets, said during IBM's earnings call. "This was our first full quarter with the z14, and with pervasive encryption and the ability to address new technologies like blockchain, we're adding new clients and new workloads to the platform. "

IBM announced the z14 mainframe in July 2017. The z14 has helped lead to a reversal in IBM's mainframe fortunes. When the z14 was first announced, IBM's quarterly system segment revenue was reported at only $1.7 billion.

"This quarter, IBM Z revenue was up 71% year-to-year with the highest shipped MIPS in history," Schroeter said. "Our mainframe is an enduring franchise. In fact, it's an enduring and growing franchise."

Schroeter noted that z14 adoption was broad-based across many countries and industries. The IBM Z mainframes are being deployed to help with machine learning, blockchain and payments workloads.

"Overall, the mainframe continues to deliver a high-value, secure and scalable platform that's critical in managing our clients' complex environments," he said. The fourth quarter was also a solid quarter for IBM's Power system business unit with revenue growth of 15 percent.

IBM Power Systems Poised for Big Year in 2018 Too

2018 is also likely to be a big year for Power, thanks in large part to the debut of the new POWER9 processor that was formally launched in December 2017. According to IBM, the POWER9 has four times the bandwidth over the previous POWER8 silicon.

POWER9 is also the silicon that is being used to power the currently-in-development Coral Summit Supercomputer, which is expected to become the world's faster supercomputer when it is completed later this year.

"We started shipping the first POWER9 architecture with the Coral Summit win," James Kavanaugh, Senior VP and CFO at IBM, said. "So [it's] a strong start to POWER9 architecture, and we'll roll the rest of that out, our low-end, starting later in the first half and early in the second half."


Sean Michael Kerner is a senior editor at ServerWatch and InternetNews.com. Follow him on Twitter @TechJournalist.

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