IBM: Storage Is Cranking

IBM Corp. (NYSE: IBM) execs pointed to storage as a driver of fourth-quarter growth during the company's earnings report today, though it's tough to determine how networked storage affected sales (see IBM Reports Earnings Rise).

IBM posted $26 billion in revenue for the quarter ended December 31, 2003, of which $9 billion, or 31 percent, came from hardware, including storage products.

"Revenue for total storage hardware grew 14 percent [sequentially], on strength in midrange disk and tape," IBM's CFO John Joyce said in a presentation to analysts today. Overall storage revenue was up 10 percent year over year.

Disk sales were up 9 percent year over year for the quarter and 10 percent for the full year, he said. But tape did well, too: "Our tape business also had strong growth, with 21 percent year-to-year growth in the fourth quarter, the second consecutive quarter of double-digit growth.

"We believe that, when the industry data becomes available, IBM storage will have gained more than a point of revenue share in disk and gained several points of share in tape."Storage services also were cited in Joyce's presentation. IBM's business continuity and disaster recovery services, which include SAN backup, drove growth in Integrated Technology Services, he said. This group of services in turn contributed about 30 percent, or roughly $342 million, to the $11.4 billion in global services revenue IBM raked in last quarter.

Okay, but what's happening in networked storage? That's not so easy to call. Joyce didn't mention SAN or NAS sales in his presentation, and IBM doesn't break out separate figures for these product lines, though they're part of the total storage figures cited above.

IBM sells Fibre Channel switches from Cisco Systems Inc. (Nasdaq: CSCO) and McData Corp. (Nasdaq: MCDTA) and the storage director product from Computer Network Technology Corp. (CNT) (Nasdaq: CMNT), along with its own products, such as the IBM TotalStorage NAS gateway.

Pricing pressure continues in the Fibre Channel market, thanks to the entry of Cisco, as seen in McData's recent financials (see McData Maudlin Over Price Pressure). Until the market shakes out, it's likely IBM will keep prices low, as it has in the past, making up in volume what it's not getting in price but not realizing big growth (see IBM Slashes Cisco MDS Pricing).

One thing in IBM's favor is a huge potential channel for SAN sales. The company's zSeries mainframes, which feature Ficon links, were up 33 percent sequentially this quarter.Mary Jander, Site Editor, Byte and Switch