IBM Revenues Down $1 Billion For Third Quarter As Hardware Sales Falter With Popularity Of The Cloud

IBM has reported its third-quarter revenues were $23.72 billion compared to $24.74 billion this time last year. The revenues were down due to the company’s underperforming hardware division, which is taking a hit with the growing popularity of cloud services. Revenues for the nine-month period totaled $72.1 billion, a decrease of 4 percent, compared with $75.2 billion for the nine months of 2012.

Revenues in the hardware group were down almost entirely across the board. Revenues from its Systems and Technology segment totaled $3.2 billion for the quarter, down 17 percent from the third-quarter of 2012. Pre-tax income decreased $291 million to a loss of $167 million.

Total systems revenues decreased 19 percent, and revenues from Power Systems were down 38 percent compared with the 2012 period. Revenues from System x were down 18 percent. Revenues from System z mainframe server products increased 6 percent compared with the year-ago period. Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), increased 56 percent. Revenues from System Storage decreased 11 percent. Revenues from Microelectronics OEM increased 1 percent.

Software revenues were up just 1 percent the prior year, showing again the company’s stagnating revenues in the third quarter.

“Hardware is down as a trend,” said Ray Wang, co-founder of Constellation Research. “There is an impact because of cloud computing.”

IBM had some of its best results with its cloud services efforts. Cloud revenue is up more than 70 percent year to date with revenue in third-quarter exceeding $1 billion, of which about $460 million is delivered as a cloud service.

As more companies choose cloud services, it can be expected that this trend will continue for IBM and other enterprise providers.