IBM's disk storage solutions revenues were flat during the most recently reported quarter, though rivals EMC Corp. and Network Appliance, Inc. both grew, as did IBM's own tape storage products revenue.
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Financial analysts are beginning wonder why Big Blue's disk storage solutions can't keep up with either rivals, or with an older generation of storage medium.
EMC reported yesterday that its systems revenue was 18% higher during the second quarter of 2007 compared to a year before. That growth was largely driven by strong performances from EMC's midrange storage products.
Meanwhile, IBM reported on July 18th that its storage systems business grew 6% year over year -- growth driven almost exclusively by a 19% increase in its tape business, while its disk-storage business stayed flat.
IBM's other businesses were generally solid for the quarter. EMC's results show that spending did occur in the disk storage market, with particular emphasis in the North American market over the previous quarter, according to financial analysts.
IBM's Q2 revenue numbers come some six weeks after an IDC report put IBM's revenue in the number one position in the worldwide combined disk and tape storage products -- ahead of Hewlett Packard Corp. and EMC.
EMC does not have a storage tape business.
"The numbers speak for themselves," said John Webster, storage analyst at Illuminata Inc.
IBM's weak performance in disk storage reflects its own loss of share, not market weakness, according to Dan Renouard, analyst at Robert W. Baird & Co.
The core market for external disk remains healthy, Renouard said.
"IBM is losing share to EMC, NetApp, Hitachi and others. [This] is related to IBM's relatively tepid product offerings in storage and possibly also related to execution," Renouard added.
IBM execs are dissatisfied with performance in the disk market and will be looking for improvement during the second half of the year, according to Mark Loughridge, IBM's senior vice president and chief financial officer.
One of the main issues is the need to integrate applications and software for midmarket disk products, said Barry Rudolph, vice president, of IBM disk storage solutions.
"Increasingly midmarket clients are requesting stronger integration," said Rudolph. "This will be an increasing focus for us, and an area where we can leverage the broad capability within IBM to help clients solve business requirements with easy to use solutions."
IBM's OEM relationships, particularly with Network Appliance Inc. and LSI Corp., may be slowing its own sales, said Webster.
"IBM seems to be looking toward vendors outside of IBM to play in the midmarket space," Webster said.
IBM's flat disk sales mirrored those of Norcross, Ga-based VAR Optimus Solutions, according to Keith Baskin, who manages the company's storage practice. However, Baskin said he is optimistic about IBM's goal of driving disk sales with application integration.
"I think that is where the NetApp story resonates with customers," Baskin said. "It's the fact that application integration with SQL, Oracle and Exchange is an enormous benefit to a customer. I'm seeing more interest in NetApp's N series products, which are IBM's re-branded NetApp products [rather] than in IBM's DS4000," Baskin added.
Baskin also wonders how OEM relationships may hurt IBM and its reseller partners.
"The N series is not [IBM's] own technology, so they've got to mark up somebody else's. The storage market is very competitive, with a lot of downward pricing pressures, so for IBM to be able to sell [the N series] and make a decent profit is probably very difficult," Baskin said.
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