IBM is continuing to move forward in its process of corporate transformation. Big Blue reported its third quarter fiscal 2015 revenue on October 19, showing both challenges and opportunities going forward.
For the quarter, revenue was reported at $19.3 billion, for a 14 percent year-over-year decline. Net income was reported at $3.0 billion, for a 14 percent decline as well.
While the overall picture is a negative trend, Martin Schroeter, SVP and CFO of IBM, commented during his company's earnings call that IBM's cloud, analytics, social, mobile and security revenue was up 27 percent in the third quarter.
"Our cloud revenue was up over 65 percent through three quarters, with strong year-to-year performance across both our private foundations revenue and our as-a-service offerings," Schroeter said. "Over the last 12 months, our cloud revenue was $9.4 billion."
Cloud Positively Impacting Power8 Servers
IBM's cloud revenue in turn is having an impact on its server fortunes for both Power8 as well as the System Z mainframes.
"We have a pretty big private cloud business, and they build those on our hardware and software content," Schroeter said. "So clearly there's some element of the premier Z-platform and the Power platform that's sitting within that cloud business."
Power servers grew by 2 percent during the quarter, which Schroeter said is the third consecutive quarter of growth for the platform.
"We saw growth in both entry-level and high-end systems, including strong growth and continued customer adoption in Linux-based systems," Schroeter said. "Our OpenPOWER initiative continues to progress as we integrate innovation from the broader ecosystem into our own products and also license IP to support third-party Power-based offerings."
System Z Server Business Growing as Well
IBM is also growing its System z mainframe business.
"System Z revenue was up 20 percent, [and] since the launch of z13 in the first quarter we've delivered growth of over 40 percent," Schroeter said. "Building on the success of Linux on z Systems in the third quarter we introduced the Linux One family of products, which embraces open source-based technologies that are the industry’s most powerful and secure enterprise servers designed for the Hybrid Cloud environment."
While System z and Power are growing, IBM's overall hardware business has been hit hard in one particular area: storage.
"We had strong performance in our Z Systems and POWER once again grew as we capture both the Unix and Linux opportunity," Schroeter said. "The hardware decline was driven by storage, which continues to be a tough market."
Schroeter added that the growth in IBM's high-end servers was more than offset by a double-digit decline in storage hardware, driven by weakness in the high-end disc and tape.