IBM Enterprise Hardware: 10 High And Low Points

Hardware Rollercoaster Ride

A lot has been written about IBM CEO Ginni Rometty's new priority for the company, which includes relying less on hardware and more on the cloud, analytics and cognitive computing. Some say Rometty is leading IBM down the wrong path. Others say she is taking the painful right steps needed for a brighter future.

But one thing is for certain, few IBM divisions have felt the impact of Rometty's mission more than its Systems and Technology Group. In just the past 12 months the hardware-centric group has been hit with a reported layoffs as high as 25 percent, huge profit losses totaling $2.4 billion this past quarter, and divestitures of key hardware products such as the pending sale of IBM's line of x86 servers to Lenovo later this year.

Here is a look at IBM's hardware division from April 2013 to today.

Rumors Swirl Over x86 Server Sale To Lenovo

On April 18, 2013, CRN reported IBM was in active negations to sell its x86 server hardware business to Lenovo. CRN was the first to break the story. Eight months later, on Jan. 23, 2014, IBM and Lenovo made it official, formally announcing plans to sell off the x86 server business for $2.3 billion.

The news came just two days after IBM reported that sales of its x86-based System x servers were down 16 percent in the fourth quarter of 2012.

When IBM Ruled The Server Market

In the fourth quarter of 2012, just before the news of IBM selling its x86 business to Lenovo, IBM was the No. 1 server maker in the world, according to Gartner research data. IBM owned 34.9 percent of the worldwide server market in terms of revenue, followed by Hewlett-Packard with 24.8 percent and Dell with 14.3 percent, according to Gartner research.

Today, IBM's market-share lead has dropped 15.1 percent. Worldwide revenue for server makers in first-quarter 2014 show HP's share of the server revenue pie was 25.5 percent, followed by IBM with 19.8 percent and Dell with 17.9 percent, according to Gartner.

Big Blue's Journey From Black To Red

In the 2012 fourth quarter, just before news broke that IBM was in talks to sell its x86 server business to Lenovo, IBM reported it brought in revenue of $29.5 billion, up from $29.0 billion in the same period the year prior. Revenue from the Systems and Technology segment totaled $5.8 billion for the quarter, down 1 percent from the fourth quarter of 2011. Systems and Technology pre-tax income was $1.0 billion, an increase of 23 percent.

In IBM's most recent 2014 first-quarter earnings it reported revenue declined 4 percent year over year to $22.4 billion. IBM reported its Systems and Technology Group had revenue of $2.4 billion, down 23 percent compared with the year prior. IBM blamed the poor performance of the group on "both the product cycle of System z and the secular challenges in Power, storage and System x." Storage revenue declined 23 percent.

Rometty Doubles Down On Cloud, Analytics, Mobile and Social

On June 4, 2013, IBM doubled down on its CAMS (Cloud, Analytics, Mobile and Social) strategy, revealing it would buy cloud platform provider SoftLayer for $2 billion. On the heels of the cloud investment IBM said on Jan. 17, 2014, that it would pump an additional $1.2 billion into expanding its SoftLayer cloud services by adding 15 new data centers around the world by the end of 2014.

In January 2014, IBM made a $1 billion investment in the analytics portion of its CAMS strategy, saying it was investing $1 billion to create a new division called the Watson Group centered on commercializing its Watson supercomputer.

IBM Says It Will Sell Its X86 Business To Lenovo

On Jan. 23, 2014, IBM made it official and announced Lenovo will acquire its x86 server business for approximately $2.3 billion.

The definitive agreement negotiated between the two companies covers IBM's System x, BladeCenter and Flex System blade servers and switches, x86-based Flex integrated systems, NeXTScale and iDataPlex servers, and associated software, blade networking and maintenance operations.

IBM Tries To Quell Partner And Customer Uncertainty

Rumors on the fate of IBM's x86 server business leading up to the official announcement were taking their toll on IBM. The uncertainty, IBM acknowledged, had hurt its server business that was losing market share to Hewlett-Packard. While confirmation of the official sale put to rest the rumors, uncertainty over the logistics of the deal began to mount.

Following the news of the pending sale, IBM and Lenovo both set out to quell partner concerns, assuring them that IBM's entire x86 team (manufacturing, service, support, sales, R&D, and manufacturing plants) would be going to Lenovo.

IBM Makes Big Investment In Future Direction

Months after inking a deal with Lenovo to sell its x86 server business, spending $2 billion to acquire SoftLayer and investing another $2.2 billion on data centers and Watson analytics technology, it was beginning to look as if IBM was shedding all its hardware business in exchange for software, services and the cloud.

On March 10, 2014, CEO Rometty decided to set the record straight. In a note to shareholders she wrote:

"Let me be clear -- we are not exiting hardware. IBM will remain a leader in high-performance and high-end systems, storage and cognitive computing, and we will continue to invest in R&D for advanced semiconductor technology."

HP Preys On IBM Partners

In May Hewlett-Packard set out to capitalize on uncertainty within the IBM Business Partner community and launched a "Project Smart Choice" campaign aimed at "rescuing" IBM partners. The program offered IBM partners information and resources to transfer their business before being forced to move to Lenovo.

On the front page of the Project Smart Choice website HP asks: "Unsure about your future with IBM x86 servers and Lenovo? Let us help you make a smarter choice."

IBM To NetApp: 'C'est La Vie'

In a sign IBM is getting serious about building its own hardware business, on May 24, 2014, IBM said it would stop selling OEM versions of NetApp's hardware in favor of own storage devices.

According to an internal memo obtained by Bloomberg, IBM said it would stop selling NetApp's N series systems, and instead push its customers to buy IBM's own storage hardware.

IBM Unleashes Storage Hardware Offensive

At IBM's Edge 2014 in Las Vegas, a platform-focused partner conference, IBM began its storage assault, unveiling updates to its flagship V7000 storage hardware that include real-time compression (without sacrificing performance, said IBM); new DS8870 Flash enclosures for companies with the speediest of storage needs; to "breakthrough" tape technology that allows data management of tape libraries to be more efficient. IBM also introduced a new software-defined Elastic Storage technology (based on IBM's General Parallel File System technology) that runs on IBM's own FlashSystem flash array.