IBM 2009 Annual Report Download - page 32

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Systems and Technology
($ in millions)
Yr.-to-Yr.
Yr.-to-Yr. Change Adjusted
For the year ended December 31: 2009 2008 Change for Currency
Systems and Technology external revenue: $16,190 $19,287 (16.1)% (14.9)%
System z (28.7)% (27.5)%
Converged System p (10.7) (9.2)
System x (4.6) (3.3)
System Storage (12.0) (11.0)
Retail Store Solutions (25.6) (23.6)
Total Systems (15.9) (14.6)
Microelectronics OEM (15.1) (15.2)
Systems and Technology revenue decreased 16.1 percent (15
percent adjusted for currency) in 2009 versus 2008 reflecting
the challenges that transactional-based businesses are facing in
the current environment. While revenue performance declined in
2009, the rate of decline improved sequentially in the third and
fourth quarters. The company gained share in System p, System
x, blades, and in System Storage external disk and tape storage
during 2009.
System z revenue decreased 28.7 percent (28 percent
adjusted for currency) in 2009 versus 2008. MIPS (millions of
instructions per second) shipments decreased 13 percent in
2009 versus the prior year. MIPS increased 4 percent in 2009
on a two year compounded growth rate and this performance is
consistent with what the company would expect at this point in
the product cycle. In the third quarter, the company introduced
System z offerings called System z Solution Editions, which
expanded the platform’s value proposition to both new and
existing clients. In 2010 the company will be releasing the next
generation System z mainframe product.
Converged System p revenue decreased 10.7 percent (9
percent adjusted for currency) in 2009 versus 2008. Low-end
server revenue declined 43 percent, midrange server revenue
decreased 2 percent and high-end server revenue decreased
10 percent versus 2008. Although revenue declined, the com-
pany continued to gain market share in the midrange and high
end of the product line by helping clients increase efficiency in
their data centers by leveraging consolidation and virtualization
results. This has led to seven consecutive quarters of share
gains. In addition, in 2009, the company increased sales gener-
ated by UNIX competitive displacements to over $600 million. In
February 2010, the company introduced several new models of
the next generation POWER systems, which will deliver 2 to 3
times the performance, within the same energy envelope.
System x revenue decreased 4.6 percent (3 percent adjusted
for currency) in 2009 versus 2008. Revenue performance in the
second half of the year was strong with third quarter revenue
increasing 0.6 percent (2 percent adjusted for currency) and
fourth quarter revenue increasing 36.8 percent (30 percent
adjusted for currency) compared to the prior year periods.
System x server revenue declined 4 percent, primarily driven by
decreased low-end server revenue (10 percent) in 2009 versus
2008. Blades revenue increased 11 percent in 2009 versus
2008. System x server has gained share in four consecutive
quarters. The company’s improved sales model and enhanced
product offerings were the key contributors to this performance.
System Storage revenue decreased 12.0 percent (11 percent
adjusted for currency) in 2009 versus 2008. Total disk revenue
decreased 9 percent versus 2008. These decreases were driven
by declines in midrange disk revenue of 18 percent and decreased
Enterprise Disk revenue of 6 percent. In the fourth quarter, the
company introduced the DS8700 product, the latest addition to
the DS8000 line of high-end disk systems. The company’s stor-
age acquisitions, XIV and Diligent, had strong performance. XIV
has added over 400 new customers since the acquisition. Tape
revenue declined 20 percent in 2009 versus 2008.
Retail Stores Solutions revenue decreased 25.6 percent (24
percent adjusted for currency) in 2009 versus 2008, reflecting
continued weakness in the retail sector.
Microelectronics OEM revenue decreased 15.1 percent (15
percent adjusted for currency), in 2009 versus 2008. Although
2009 revenue declined, second half revenue improved signifi-
cantly over first half performance with performance essentially
flat compared to the prior year. The company’s 45 nanometer
technology is in production and on track to drive the launch of
the POWER7 systems in 2010.
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