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Z and Power Systems Instill Hope in IBM’s Hardware Segment

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Oct. 23 2015, Updated 8:07 a.m. ET

Z Systems and Power Systems will drive growth

Previously in the series, we discussed IBM’s (IBM) performance in 3Q15. IBM’s Hardware segment reported a 32% fall in its revenue on a year-over-year basis. In constant currency terms, the segment fell by 2%.

Z Systems and Power Systems contributed positively to IBM’s hardware revenues in 3Q15. IBM’s Power Systems business is its high-end server unit that focuses on Unix and Linux computing. IBM’s z Systems refers to its mainframe business.

In fiscal 3Q15, z Systems’s computing power, MIPS (million instructions per second), grew by 18%, while its revenue rose by 20% in constant currency terms.

Power Systems reported a 3% fall in its revenue in 3Q15. However, in constant currency terms, it reported a rise of 2%. IBM’s Storage business revenue continued to fall. In constant currency terms, the Storage business reported a 14% fall in revenue.

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IBM launched power systems LC servers

On October 9, 2015, IBM unveiled Power Systems LC, a new line of power servers aimed specifically at big data analytics, cloud, and HPC (high-performance computing) workloads. IBM launched Power Systems LC to gain an edge on Intel’s (INTC) x86 servers.

IBM claims that its three newly unveiled Power Systems LC servers cost 50% less than a comparable x86 server and provide twice the level of performance.

IBM’s Power Systems LC servers are designed and based on OpenPOWER Foundation technology. OpenPOWER Foundation is an open hardware technology initiative that was started in 2013 by Google (GOOG), IBM, NVIDIA (NVDA), Mellanox Technologies (MLNX), and Tyan.

With the sale of its x86 servers, IBM is intent to streamline its Hardware business with POWER 8 servers and z System mainframes. Looking at their growth, they are likely to find traction that will be instrumental in driving growth in IBM’s Hardware business.

You can consider investing in the SPDR S&P 500 ETF (SPY) to gain exposure to the technology sector. The ETF invests about 18% of its holdings in the technology sector.

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