IBM revenues drop as hard disc unit goes to Hitachi

18 April 2002 IBM has reported another fall in revenues for its latest financial quarter, which the systems giant blames on depressed hardware sales. At the same time, IBM has also announced the merger of its hard disk storage business with Japanese electronics giant Hitachi.

For its first quarter of 2002, IBM posted revenues of $18.6 billion (€20.9 billion), a 12% drop on the same period the previous year. This was expected following IBM’s first profit warning since 1991, announced earlier this month. Its net income figures brought worse news. Its Q1 net income fell to $1.19 billion (€1.3 billion), a fall of 32% year-on-year.

Revenues fell across all of divisions. However, hardware performed particularly poorly, with revenues down to $6.4 billion (€7.2 billion), a 25% drop on the same quarter a year ago. These figures are especially worrying because hardware sales account for more than one-third of IBM revenues.

IBM executives offered a variety of reasons for the poor performance, including “deferred purchase decisions”, “price pressures” and “continuing [depressed] industry demand” for poor sales of its mainframe, mid-range Unix servers and personal computers.

However, IBM’s software division was buoyed by a robust performance from its middleware and software tool products. Despite overall Q1 software sales being down 1%, year-on-year, revenues from WebSphere, IBM’s flagship application server and tools product suite, grew by 53% on the same quarter a year earlier.

Meanwhile, IBM is transferring its hard disk drive business to Hitachi, effectively signalling IBM’s retreat from the components market. Although dubbed a “joint venture”, Hitachi will own 70% of the new company and make a payment to IBM for its hard disc drive assets. IBM has struggled to increase original equipment manufacturer (OEM) sales of its hard disc technology to other vendors in recent years.

“Use of hard disc drives is expanding, not only in PCs, servers and redundant array of independent disks (RAID) systems, but also in a wide range of emerging digital appliances,” said Yoshiro Kuwata, executive vice president at Hitachi.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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