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January 25, 2008
IBM Optimistic About Global IT Buildout
Last week, IBM announced strong fourth quarter earnings results and expressed a good start and positive outlook for 2008. The company reported that in Q4 it collected $28.9 billion in revenue, representing a 10 percent increase compared to Q4 of last year. For the year, that brought the revenue total to $98.8 billion, up eight percent over 2006. At a time when economists are increasingly worried about the prospects of a U.S. recession, that's good news indeed. The IBM Q4 report even managed to rally the troubled U.S. stock market for a day.
Looking at the x86 server segment, IBM reported that System x revenue grew at a comfortable six percent year over year, but blades surged ahead with 31 percent growth. The company noted that x86 quad-core equipped System x servers sold out in the fourth quarter, presumably because AMD's Barcelona chips were MIA, leaving only Xeon quad-core systems available for customers.
Behind those cheery numbers is the fact that IBM's Q4 growth was only a moderate five percent in the U.S., with the weakening dollar acting as an incentive for foreign sales. The low value of the dollar also helped to prop up earnings totals, since all the revenue from foreign currencies is converted into greenbacks for the bottom line. IBM said that 65 percent of Q4 revenue came from outside the United States, a number which is virtually identical to the 67 percent HP reported for its non-U.S. revenue slice in its Fiscal Year Q4.
Perhaps more importantly, the fastest growing economies, such as India, China and Russia, made up 22 percent of IBM's revenue base, and these countries collectively grew more than 20 percent in the quarter. The red hot economies of the BRIC nations -- Brazil, Russia, India, China -- are now being joined by other emerging economies, like South Africa, Poland and Malaysia, which are also taking advantage of local tech talent and a rapidly developing middle class. All of these countries are quickly building up IT capabilities, and often without the obstacle of having to deal with a legacy infrastructure.
"In some ways the buildout of infrastructure is much like the construction of the railroads and telegraph lines that helped open new markets during the California Gold Rush, said Mark Loughridge, IBM's senior vice president and chief financial officer. "In the past, IBM helped build the business and IT infrastructure for much of the developed world. Today, in what has become the Gold Rush of the 21st century, we see a new era of growth for IBM in these emerging markets."
IBM's optimistic outlook for 2008 is based on the continued robustness of developing economies and the company's intent to keep investing in them. Western Europe, while overall not expected to grow as quickly as emerging economies, will likely outpace the U.S. in 2008. This past week IBM teamed with Intel and Cisco to announce the expansion of its HPC facility in Montpellier, France. The new facility will contain state-of-the-art IBM cluster setups for would-be European customers to benchmark and test their HPC applications. Like other globalized IT firms, IBM is counting on foreign revenue to take up some of the slack of anticipated weaker growth in the U.S this year. That should work out as long as the U.S. doesn't head into a severe recession that would pull the global economy down with it.
The HPC market seem to be reflecting the overall trend in a global IT build out. Although neither IBM nor any other firm releases public data that ties HPC revenue to geographic regions, analysts are predicting an increasingly globalized HPC community. In 2006, an IDC report titled "Worldwide Technical Server 2006-2010 Forecast by Geographic Region" projected that North American HPC server revenue would grow from $4.571 billion in 2005 to $6.649 billion in 2010; the corresponding figures for the rest of the world are $4.627 billion in 2005 and $7.566 billion in 2010.
Other anecdotal evidence points to an expanding international HPC presence. For example, the November 2007 edition of the TOP500 list showed three of the top five systems belonging to nations other than the United States, specifically, an IBM Blue Gene/P system in Germany at number two, an HP Cluster Platform 3000 BL460c in India at number four, and another HP Cluster Platform 3000 BL460c in Sweden at number five. Beyond the elite systems, a number of significant systems have been announced around the world over the last few months, including:
- the Cray XT4 HECToR system at the University of Edinburgh, UK (deployed).
- an SGI Altix system for the China National Satellite Meteorological Center (deployed).
- a couple of Bull NovaScale supercomputers for the Universidade Federal de Pernambuco and Universidade Federal do Ceara in Brazil (presumably deployed).
- a 14-teraflop IBM Blue Gene/P system for the Meraka Institute in South Africa.
- a Cray XT4 system at the National Astronomical Observatory of Japan.
- an Appro Xtreme-X supercomputer for Japan's Center for Computational Sciences at the University of Tsukuba.
- a Cray XT5 system for the Danish Meteorological Institute.
- a NEC SX-9 for Japan's Tohoku University.
- a couple of IBM POWER6 clusters for the European Centre for Medium-Range Weather Forecasts in the UK.
- the most recent announcement of the IBM Blue Gene/P system for Moscow State University, Russia's first Blue Gene.
The Russian Blue Gene system points to IBM's enthusiasm for HPC sales opportunities in the BRIC countries. According to Dave Turek, the company's VP of Deep Computing, their expectations are that sales will grow proportionately to the extent that those countries make broader commitments to the sectors of the economy that typically drive HPC demand. IBM sees China, in particular, as a country where industrial growth is opening up a broad range opportunities for HPC. But the company expects that pattern to be reflected among other BRIC nations as well.
"In China, for example, we see the emergence of industrial sectors around automotive and aerospace; and petroleum exploration in Russia and South America," said Turek. "This is all a stimulus to HPC sales. And the opening up of financial sectors is also a broad demand driver for HPC. I think that HPC demand in the BRIC countries will be led by the commitment and general buildout to support these types of industries."
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