Thursday, August 10, 2017

Do two positive quarters signal a major turnaround for IBM Storage?

By Bill Moran and Rich Ptak

Although we don’t usually cover IBM storage, it’s worth calling attention to what appears to be a significant positive development.   Ed Walsh joined IBM as general manager of IBM Storage and Software Defined Infrastructure on July 11 of 2016.  He joined IBM from Catalogic Software, where he was CEO since 2014.  IBM Storage which had endured 21 consecutive quarters of declining revenue has turned a corner.  Revenue results since then appear below.

Storage Revenue by Quarter

The change represents a dramatic 17-point swing from -10% in 4Q16 to a positive 7% growth in 1Q17. Growth that continued with another 2Q17 revenue increase of 8%.

With corporate IBM posting 20 or so quarters of declining revenues, IBM Storage reversing the trend by increasing revenue is great news. Storage requires proper investments to maintain such growth. Recent indicators, e.g. announcement of a successful collaboration with Sony using sputtered[1] magnetic tape to advance toward a dramatic increase in tape storage capacities (to 330 TB), suggests they will get what’s needed. And, IBM corporate will shift focus to other problem areas.

We expect IBM storage customers to feel reassured about existing IBM storage investments and benefits. They will view continued investment in and growth with IBM storage as good business sense. 

We fully understand that the storage marketplace remains intensely competitive. We recognize two-quarters of growth doesn’t guarantee success. Any benefits IBM enjoyed from the confusion resulting from the EMC/Dell merger, will disappear. The IBM Storage team will need to remain very motivated and highly competitive.

We are comfortable ending on a positive note. Clearly, IBM management were hoping for exactly what Ed Walsh and his team are delivering. In July alone, they made significant storage announcements, one was a new all flash solution for Exabyte Data analysis for Hortonworks[2]. The other was about a family of new flash arrays[3]. One model, when attached to the new z14 mainframe, delivers less than 20 microsecond response times. With more new offerings coming in 2H17, we look forward to 3Q17 revenue numbers to see if the trend continues. We’re inclined to think it will.

[1] The word “sputtered” is not a misprint. The new tape format is exactly that. It is a major breakthrough in tape technology. Google it for more information.