The Future of IBM Hardware

Arthur Cole

Has IBM seen the writing on the wall? Is it looking to get out of the server hardware market before virtualization sends it crashing to the floor?


Top execs may deny it, but a number of recent moves seems to indicate that the company has concluded software is where it will be at in the future.


First, there was the recent announcement that Lenovo, which already owns IBM's former PC unit, will begin selling rebranded IBM x86 models later this year. The agreement is limited to single- and dual-processor System x designs, but it nevertheless shows that IBM isn't afraid to share its server revenues with a third party. Big Blue is even providing financing, maintenance and service support.


If the ultimate goal is to increase server revenues by licensing third-party brands, then the System x was probably the best choice. IBM's overall server sales were flat last year at $13.3 billion, but the System x made up the bulk of that amount, jumping 8 percent to $4.83 billion. Systems z and i both dropped 11 percent to $3.19 billion and $1.11 billion, respectively, while the System p jumped 9 percent to $4.16 billion. If you have to share, it makes sense to hand out pieces of the largest pie.


On its own, a simple licensing deal for server hardware would be no big deal. But in light of the energy that IBM is devoting to software systems, some people are starting to wonder if there's a broader trend at work here. Earlier this week, the company announced the Foundation line of software-based Linux servers aimed at small and medium-sized organizations. The company has also unveiled the beta version of Bluehouse, a Web-based offering for secure extranets.


Couple that with some of the acquisitions that IBM has made lately, such as AptSoft, which specializes in SOA-based business processing software, and there is a clear trend toward a more aggressive approach toward the business application side of the data center to counter the likes of Microsoft, Oracle and SAP.


At the moment, IBM is still a powerhouse in everything from big iron to blades, so the likely explanation is that the company is hedging its bets. But if virtualization does start to tear into server demand as the experts predict, it probably does makes sense to unload hardware lines onto companies that can survive on smaller volumes.

Add Comment      Leave a comment on this blog post
May 10, 2008 7:44 AM Amyobus Key Amyobus Key  says:
IBM will always been in the business of hardware as well as software. Their image would be hurt if it appeared they had tucked their tails between their legs and run with the increase in hardware competition. They have always been successful and producing both high end and low end units. Reply
May 31, 2008 9:39 AM Malliobiana Malliobiana  says:
That would be a sad day if IBM trimmed its activities. We always appreciated their belt and suspenders policy which contributed to reliable service in hardware sectors. Reply

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