Editor’s note: Geoff Woollacott is Engagement Manager/Senior Analyst and Krista Macomber is Research Analyst with Technology Business Research.


HAMPTON, N.H. – Steady as she goes, IBM (NYSE: IBM) again leveraged investment in growth initiatives to increase revenue 7.8% year-to-year to $26.2 billion in 3Q11 and increase its 2011 full-year expectations for the third consecutive quarter. (Read details here.)

IBM reported its year-to-date Cloud revenue is double its 2010 full-year figure, Smarter Planet was up 50% year-to-date, and the quarter’s Business Analytics revenue grew 19% year-to-year. Performance in Growth Markets continued to outperform that in mature markets, also increasing a reported 19% year-to-year.

Total Systems Technology Group (STG) revenue increased a reported 4% year-to-year to $4.5 billion, driven by reported 15% year-to-year Power systems revenue growth. IBM’s Power server performance provides IBM with a twofold benefit: near-term competitive displacement, and potential insulation against weakening macroeconomic certainty in mature markets. IBM reported more than 250 competitive displacements, split evenly between HP and Oracle/Sun, for $225 million in Power revenue during the quarter.

TBR anticipates IBM’s continued investment in solutions offerings such as Business Analytics, Workload Optimization and Cloud will provide continued STG revenue pull-through in 4Q11. IBM reported 14% year-to-year growth to Retail Store Solutions revenue and 8% year-to-year growth to System Storage in 3Q11, which TBR attributes at least in part to IBM’s investment to expand its analytics capabilities.

IBM’s earnings announcement was not without its concerns. System x and z server year-to-year revenue growth showed signs of deceleration in 3Q11. System z revenue declined 5% year-to-year, as the July introduction of the z114 was unable to overcome z196 lifecycle cyclicality. System x remained essentially flat at a 1% year-to-year increase. Core server line performance bears watching in going forward, driven more by macroeconomic concerns than any mis-firings in IBM’s core strategy, which remains solid.

R&D investment continues paying off

IBM coordinates R&D spend across its server, storage and networking portfolios to fuel Smarter Computing, further driving its technology forward from back office support and into mission-critical operations. IBM enables systems that address customers’ unique workload requirements to meet demand for increased ROI.

IBM enables more efficient workload management, intelligent analytics and heightened security for virtualized and cloud-based environments to meet emerging customer requirements in the datacenter. The advent of cloud computing results in ever-expanding data pools needing to be secured and can be leveraged via analytics for increased business value. Simultaneously, economic concerns in mature markets leave IT budgets flat, if not shrinking, establishing a need for IT that delivers a measurably reduced TCO.

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