Storage sales make IBM blue

After four straight quarters of growth, IBM storage hardware revenue crashed in the first quarter of 2018. IBM reported a 15% decline in storage hardware revenue, a drop that dragged the entire company’s overall revenue to fall short of expectations.

That fall comes after a year of gains for IBM systems storage under storage general manager Ed Walsh, who took over in June 2016 following more than four years of continued losses.

On IBM’s earnings call Tuesday night, CFO Jim Kavanaugh blamed the storage turnaround on increased competition, pricing pressures and “some sales execution challenges.” He did say he expects a strong IBM storage product portfolio and new launches in late 2018 to fuel a rebound.

And Kavanaugh emphasized the declines were only on the IBM storage hardware side. He said IBM’s software-defined and cloud object storage revenue increased, but those are attributed to other IBM segments.

Kavanaugh described the storage market as “aggressive,” but said he has confidence in the IBM storage team.

“We were disappointed in our storage performance and it contributed to a modest shortfall to our own expectations of IBM’s revenue growth in the quarter,” Kavanaugh said.

“But I’ll tell you we have a great team with a proven track record. This is the same team that has proven that they’ve revitalized the portfolio in the past, took market share for four consecutive quarters. We have all the confidence in the world that we can get our storage business back to where it needs to be as we move forward in the second half of 2018.”

IBM attributed its 2017 rebound to surges in flash and cloud storage. According to IT research firm IDC, IBM gained share in external (networked) storage in every quarter of 2017. For the full year, IBM increased its revenue to $2.184 billion from $2.073 billion in 2016 while the overall external storage systems market was flat. IBM increased its share from 9% in 2016 to 9.6% in 2017. But unless the overall storage market tanked, IBM dropped share in the first quarter of 2018.