IBM results expose hardware-software gulf

The contrast in fortunes between the software and hardware markets was thrown into sharp relief by IBM’s first quarter results.

Big Blue claims it is continuing to “perform well” during the downturn as Q1 net profits slid by a mere one per cent to $2.3bn. Revenues hit $21.7bn – down 11 per cent in dollars and four per cent in local currencies.

EMEA revenues were relatively solid, falling just three per cent with currency effects stripped out.

The giant's performance was propped up by its buoyant software business, as well as stability within services.

Software revenues rose by two per cent in local currencies to $4.5bn. Within that, middleware sales rose by four per cent, while operating systems sales were flat. Meanwhile, Global Services revenues fell one per cent in local currencies.

Contrast that with IBM’s Systems and Technology segment, where revenues tumbled by 18 per cent in local currencies to $3.2bn. Within that, system storage revenues plunged by 20 per cent, System x servers by 27 per cent, System p products by two per cent and System z mainframe server products by 19 per cent.

IBM chief executive Sam Palmisano said in a statement that the giant remains ahead of pace for its 2010 earnings goal.

“IBM continued to perform well in a very difficult economic environment,” he said. “This was due to our long-term strategic focus: shifting into software and services, divesting of commodity businesses, and creating solutions that help clients reduce cost and conserve capital.

“At the same time we have a disciplined approach to cost and expense management giving us a strong financial position.”