IBM's Unix poaching slows in Q1

HP vague, Oracle mum on competitive wins

IBM wants you to know about its competitive wins against HP and Oracle (formerly Sun Microsystems) shops, and Oracle doesn't want you to know much of anything.

IBM's goal is reasonable, considering that they want to to put their best face forward after announcing their first-quarter results. Sales of Big Blue's Power Systems servers are on the decline due to market forces - many companies are deploying new applications on x64 iron or porting old ones off expensive RISC/Itanium Unix boxes. Power7 product transitions aren't helping, either.

As El Reg reported last week, IBM's first quarter was far from embarrassing. Revenues rose by 5 per cent to $22.9bn, and net income was goosed by 13 per cent, to $2.6bn. IBM's Systems and Technology Group, which makes servers, storage, and chips, had a similar 5 per cent revenue increase to $3.4bn, despite a 17 per cent decline in both Power Systems and System z mainframe sales.

In addition, IBM's x64 rack, tower, and blade server biz has roared back to something closer to 2008 levels - which were not all that great, mind you. But these days, any growth is infinitely preferable to the continuing, gut-wrenching declines that the server racket endured in 2009.

During the recently completed first quarter, however, customers knew that Power7 servers were just around the corner. IBM had plenty of customers who were willing to sit out the quarter and wait to see what the new machines would look like and how they would be priced.

With the midrange Power7 boxes announced in February, IBM offers roughly twice the performance on base hardware in the Power 750 and 770 machines for the same price as the Power 550 and 570 machines they replace. So it is good to wait to see how entry and high-end machines will pan out.

Ditto for the new Power7 blades, the Power Systems 701 and 702, announced earlier this month, which offer more than two times better bang for the buck on raw server iron compared to the JS23 and JS43 blades they replace. And this extra bang is also contributing some to revenue declines for the modest number of Power7 deals Big Blue must have done in the first quarter.

But forget all that. What IBM now wants you to know that it thinks its Unix business held share, despite the decline, and did so in part because of its ongoing campaign to unseat HP and Oracle boxes from data centers with Power Systems iron. (Whatever you do, don't think about how Big Blue needs to sell twice as much iron now to make the same money, or sell more software and services atop cheaper iron, to make its Power Systems numbers.)

In the first quarter, IBM says that more than 200 companies moved off HP, Oracle, and other iron (but mostly HP and Oracle iron) and onto IBM servers and storage. According to Mark Loughridge, IBM's chief financial officer, IBM had over 170 competitive wins in Q1 with Power Systems machines, generating more than $125m in sales. No one seemed to hear him, so IBM put out a press release detailing its competitive takeouts for servers and storage through its Migration Factory poaching program. And although the numbers don't exactly jibe with what CFO Loughridge said, they're close.

IBM says that in the four years since the Migration Factory was set up, more than 2,700 customers have moved from other iron to Big Blue servers and storage, with the majority of the migrations coming from HP and Sun (now Oracle). In just the first quarter of 2010, 117 server or storage customers moved from Oracle/Sun iron to IBM gear, and 95 moved from HP boxes, for a total of 212 deals involving these two vendors, IBM says.

In that just-completed quarter, IBM said that 107 deals involved moving from Oracle/Sun systems to Power-based servers and 41 involved moving HP gear to Power Systems. That's 148 machines. Another 21 customers moved from HP or Sun iron to System x servers (based on x64 chips) and another 16 moved to mainframes. That's 185 customers when I do the math. (Maybe 15 of the 185 were moving from one non-Unix platform to a different non-Unix platform?)

Back in November, when IBM cut DDR2 memory prices on Power Systems machines based on Power6 and Power6+ processors by 28 to 70 per cent, the company said the reason it was to help stimulate migrations off Sun and HP gear. El Reg guessed that the price cuts were also designed to get Power6 memory prices in line with where DDR3 memory prices would be on then-future Power7 boxes.

That turned out to be the case, but IBM did not confirm this suspicion until the Power7 machines launched this year. Anyway, IBM did about $500m in business related to Sun and HP takeouts in 2006, 2007, and 2008, and wanted to top this in 2009. And thanks in part to those memory-price drops - and what is presumed to be pretty aggressive discounting on Power Systems processors and storage, as well - IBM was able to close nearly 200 HP and Sun takeout deals worth almost $200m in the quarter. For the full 2009 year, IBM did 574 Sun and HP server takeouts, generating $600m in revenues.

In early April, HP hinted that it was also doing takeout deals of its own, and put out a vague statement that "the number of global companies replacing Sun and IBM systems with more flexible HP solutions offering a lower total cost of ownership (TCO) is rising." The press release cited Kuhmo Tires, a South Korean tire maker, as dumping an IBM mainframe for some Superdome Itanium servers running HP-UX. Bernalillo County, New Mexico, "the most populous county in New Mexico," ditched its mainframe (probably ancient and small) for Integrity blades. Sun got jabbed, as well, with HP noting that VTB Bank in Russia recently dumped Sun Sparc servers and Solaris Unix to get a mix of Superdomes and Integrity blades running HP-UX.

Here at El Reg, we like to quantify trends, but when we pestered HP to get some precise numbers - like the ones IBM has been giving out for a while - we were told: "Unfortunately, HP doesn't divulge that level of detail. But thanks for your response."

That's a load of horse hockey, of course. In November 2008, HP was perfectly happy to crow that it had converted more than 250 IBM mainframe shops to Integrity machines in the prior two years - which prompted IBM to retaliate about the 5,000 HP and Sun takeouts it had done in the prior four years.

Sun hasn't said jack about much of anything in the server space since the end of 2008, when Jonathan Schwartz quietly put the company up for sale. Since the Oracle acquisition was announced a year ago, everything was scripted by Oracle and scrubbed clean of technical or marketing detail. Sun used to be very aggressive in its mainframe, AIX, and HP-UX takeout programs, and made a fair bit of money in the late 1990s and early 2000s with this - even peddling Solaris on Opteron servers in 2004 to try to get some leverage.

But Oracle has not ratcheted up its selling machine to go after IBM and HP, mainly because it is still trying to figure out what it's got and how to sell stuff to the remaining Sun customer base, which numbers in the tens of thousands.

Just on the off chance that something interesting would be divulged in a presentation that John Fowler, executive vice president of hardware at Oracle (and the top Sunner to make the jump to Oracle), gave to Wall Street outlining Sun's server and storage businesses earlier this week, El Reg listened in. It was a complete waste of time. Less was said in that meeting than was divulged back in January when the Sun acquisition closed.

Sun has not talked about its plans for the new Opteron 6100 and impending Opteron 4100 processors from Advanced Micro Devices or the Xeon 7500 processors from Intel, or fleshed out its roadmap with Fujitsu for Sparc Enterprise M systems. And aside from admitting that they exist, Sun has not said much about when to expect the Rainbow Falls Sparc T3 chips originally due around the middle of the year. Thanks to the kindness of Sun shops that have been given information and passed it on, El Reg has told you more about Sun's plans than Sun has in the past year and a half.

If Oracle wants to be in the systems business, it had damned well start behaving like the underdog that it is. That means opening up about what it is doing, selling aggressively, and talking about where it is getting traction. ®

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