IBM Shark Sales Sink

It appears IBM Corp.'s (NYSE: IBM) new storage systems came out at the wrong time.

IBM last week announced new high-end and midrange systems that executives said could double the company's market share in external disk by 2008 (see IBM's New Shark Tale). Today, IBM announced another quarter of strong growth in midrange storage systems, while revenue on the high-end slipped (see IBM Revenues Up 9%).

IBM CFO Mark Loughridge blames the high-end declines on product transition. He says midrange disk growth of 27 percent year-over-year was offset by declines in high-end systems as customers anticipated our high-end storage announcements.”

Big Blue reported storage hardware revenues grew 5 percent overall, with disk systems down 1 percent. IBM's tape revenues increased 17 percent and Tivoli storage software ticked up 2 percent.

It's no mystery why IBM got its hopes up high for disk. When IBM rolled out its DS8000 high-end and DS6000 midrange systems October 12, SVP of the systems and technology group Bill Zeitler points out that IBM’s external disk market share doubled since it launched its mainframe Shark storage systems in 1999. Zeitler says he expects the DS8000 – the Shark’s successor – and DS6000 to result in another doubling of market share by 2008.IBM was third in worldwide SAN market share behind EMC Corp. (NYSE: EMC) and Hewlett-Packard Co. (NYSE: HPQ) in the second quarter of this year, according to IDC.

Today, execs didn't change their upbeat tone. “We’re optimistic about our fourth quarter with this announcement,” Loughridge said on the earnings conference call today.

However, in addition to customer waffling, IBM faces other challenges, such as competition from Hitachi Data Systems (HDS), which also rolled out a new high-end system that will compete with the DS8000 (see Hitachi Struts Mr. Universal).

There are also changes afoot in the midrange system area, where IBM slipped from last quarter. Key to IBM’s storage strength here has been the FastT midrange systems that it sells through an OEM deal with Engenio Information Technologies Inc. That family of systems has been rebranded as the DS4000, and there's talk that IBM will look to compete with its own newer offerings. IBM executives say they will continue to use Engenio as a supplier, and will refresh the family next year (see IBM Still Loves Engenio).

— Dave Raffo, Senior Editor, Byte and Switch0