Analysts polled by Thomson Financial expect IBM to report sales of $25.35 billion and a per-share profit of $3.03. Analyst Chris Whitmore of Deutsche Bank Securities says, in a note to clients today, that he expects sales that are slightly above the consensus at $25.9 billion, which would amount to growth of more than nine percent over the year-ago quarter, and earnings of $3.01 or slightly below.

Whitmore says that checks of IBM’s sales and distribution channels indicate that demand remains strong for IBM’s mainframe systems as well as servers running its Power Architecture chip, and he says it’s taking meaningful share away from Oracle’s UltraSparc business, the line of servers Oracle absorbed when it acquired Sun Microsystems last year.

The service business should turn in a beefy quarter on the heels of new contract wins. Expect service revenue to come in line with previous forecasts of $12 to $13 billion, Whitmore says, with help from a favorable environment for foreign currencies.

That’s not to say there aren’t worries: Whitmore points out that IBM announced only five deals during the quarter, which is half as many as in the year-ago quarter. It’s also been disclosing less information about each deal, and only one — with India Infoline — was north of $50 million. “IBM’s services bookings figure is the biggest wild card this quarter due to the limited data,” he writes. Still, he expects it to track in line with prior forecasts, mainly because several five- and 10-year deals have been announced, even though their size hasn’t been disclosed.

We suspect consensus bookings expectation is $12B to $13B for the June Q and believe IBM is tracking in line with this estimate with solid long-term signings, as several multi-year deals (five and 10 years) were announced (although not sized).

Even so, Whitmore expects no change to IBM’s confident prediction that it will deliver $20 per share of earnings in 2015, and that implies annual growth of between 11 and 12 percent, which for now doesn’t seem unreasonable. As usual, all eyes will be looking for any hint that Big Blue is throttling back on its shorter-term guidance.

IBM has been a fairly solid performer this year, having seen its share price increase by more than 19 percent since the start of the year, beating both the Dow Jones Industrial Average and the Standard & Poor’s 500. Its shares closed Friday at $175.54, up $1.31, but were trading lower in premarket action this morning. We’ll see how it all turns out later in the day. See you then.

Often they’ll turn to public cloud providers like Amazon or Google or Microsoft. Those are the three names that usually get mentioned in the same breath whenever enterprise cloud services come up. But what about IT giant IBM? It turns out it’s a significant player in the cloud game, offering both public and private cloud services. Last week I sat down with Ric Telford, IBM’s VP of Cloud Services to talk about how Big Blue’s cloud business is going and what its priorities are in the year just started.

NewEnterprise: Ric, let’s start at the top. Tell me how IBM sees the cloud business right now?

Telford: Initially the cloud is all about doing more with less. Suddenly you could deliver the same IT services for less. Fast-forward to today, and it’s not all about saving money. People are realizing they can do things they never could before with the cloud. I was recently met with a small aircraft engineering company, and the guy running it described how he competes with much larger companies for defense contracts. It used to be that doing all the modeling and simulations he needed required buying hardware and software and running it all on premise. Now he can go out to the cloud, pay for what he uses and be done with it. He can now compete for contracts he wouldn’t have been able to go after before. And we’re seeing a lot of examples like that in industry after industry.

Someone said to me the other day that the cloud is going to have to have all the parts of the mainframe. Do you agree with that?

There’s a lot of parallels between the cloud and the mainframe. IBM’s view is that we have a single-reference architecture. It’s the same whether we’re delivering the service or if we build it for you. We did a deal recently with France Telecom where they are going to be a cloud services provider to their clients. They already have the network connections. But they’re not a cloud company. So they’re using IBM’s cloud architecture to give them all the pieces in one easy-to-consume bite. So we have that architecture and we use the same blueprint in all the various permutations of the cloud. For some people it’s confusing, but for us it’s all the same whether you want to have it inside your firewall or outside.

Which do your customers tend to prefer–a private cloud or a public cloud?

We do surveys every year and right now we’re seeing about a two-to-one preference for private versus public. About 60 to 70 percent of respondents say they’re working on a private cloud, and about 30 to 40 say they’re working on the public cloud. To us it’s all the same. We offer a core set of services from the IBM cloud–development, test, compute, storage, collaborations, desktop. But we can also build the same thing inside your firewall.

How big is your public cloud business?

I can’t give you a revenue figure because different business units take advantage of it to deliver different things. We just opened up a delivery center in Research Triangle Park. It’s probably one of the most advanced data centers in the world. And now we’re rolling out a model that we are cloning around the world. We just opened one in Germany and another in Canada. And then we’ll just keep adding them. We manage about eight million square feet of data centers around the world.

How does a company typically get started with the cloud?

Usually I suggest they start with their develop-and-test operations. It’s usually not mission-critical, and there’s usually a lot of hardware that’s not being used. Usually that’s the group that buys hardware long before it’s needed and it ends up sitting idle 90 percent of the time. At IBM we put our whole research division on the cloud because they were the worst hardware hoarders, putting servers under desks and whatnot. They knew that if they needed a new server it would take weeks to get it. Now they go out to the research and compute cloud, and the services they need are usually ready to use in minutes or at most an hour. It just makes a huge difference in people’s ability to get going.

So what you are your priorities for this year?

One of the big things we started seeing last year was an uptake of cloud delivery in industry-specific ways. We’re working not just on the generic things like email and collaboration, but on the specific applications that are used in various industries. Health care, banking and government are a few that have complicated regulatory needs that vary state by state and country by country, and we have the deep understanding required to work with them. We also built a private cloud to help the 29 countries involved in NATO share data on logistics and troop deployments. We also have an initiative with the consumer electronics industry. Utilities is another, and it gets tied in with our Smarter Planet initiatives.

Will IBM be making deals in the cloud this year?

IBM will make a few billion in acquisitions. Cloud is one of the four key growth areas we’re focused on. The others are Smarter Planet, analytics and the growth markets. We’ve said that in those four growth initiatives we’re going for $20 billion in additional revenue by 2014. Four initiatives, five years and $20 billion dollars. That’s certainly not all going to happen organically.

I caught up with Li last week to talk about the way he sees the cloud shaping up in the enterprise, and where he’s seeing opportunity as it develops. If cloud computing turns out to be the fundamentally new computing platform that many think it is, then there’s a lot of different pieces–Li refers to these as layers–that have to be assembled to make it work. And it’s in those layers where he looks for opportunities.

NewEnterprise: So what do you mean when you talk about the “cloudframe”?

Li: “I keep telling everyone that every time there’s a new computing platform, you basically have to re-create all the pieces of the mainframe. The basic building blocks of computing don’t change. You still need provisioning, management, security, and you need networking. The pieces may change, and different layers get merged into others. I’ve been calling it the cloudframe, for lack of a better word, which allows you to redefine all the layers, from the data layer to the storage layer to the provisioning management layer. Some of the layers that may have been separate before are being merged into one. So I’m spending my time figuring which are the layers that you can build a company around and which are the ones that become features rather than products.

So what are you finding?

There are two layers I’ve spent a lot of time time on, and where we’ve made investments. One is the data layer, and one of the companies I’ve spent a lot of time on is Cloudera, which is built around the Hadoop ecosystem. With the new types of data and applications that are out there, it’s really challenging the idea about whether the relational database is the right data management solution of the future. If you look at the big Internet data centers, say at Google or Facebook, the answer is no. There are no Oracle databases running those applications. Instead they’re using things like Hadoop and MapReduce and distributed file systems on commodity hardware. So I think the whole data structure is moving because the types and volumes of data are changing so much. The data is a lot more complex, and there’s a lot more of it.

There’s been a lot of suspicion and resistance in the enterprise toward letting critical data and applications out the door to run on someone else’s hardware. Is that changing?

I’m less rigid with my definition of the cloud. It doesn’t have to all run on Amazon or something like that. This cloudframe idea is really about extracting applications and services from underlying hardware and resources. It’s about having things available to you anywhere, and having them scale up quickly. They can exist on both sides of the firewall. When we launched Cloudera we thought everyone was going to want to run things on Amazon’s cloud. But most enterprise customers are running large installations of Hadoop on their own servers.

So the data layer is clearly one place where you think businesses can be built. What are some of the others?

Once you have the data layer set, there will be a lot of innovation on the storage side. We’re doing a lot of things around flash memory storage. We’ve invested in Fusion-io, which uses flash memory to build high-performance storage systems. Before, you had to have a storage area network to get the performance and availability you needed to run a big database application. Adding flash memory to your storage lets you expand a lot and do it efficiently. If you look at a lot of the cloud data centers, there’s not a lot of EMC and NetApps gear running in them. There’s a lot of commodity white boxes with Fusion-io starting to get deployed in them.

Last year you joined the board of Nimbula after Accel made an investment in it. That must be part of another layer you like, right?

That’s the application layer. Nimbula is from the guys who first built Amazon EC2. Now they’re actually building a private version of EC2, for the enterprises who for one reason or another can’t go to the public cloud. If an IT manager wants to deploy an app these days they have to put in a request and then he may get servers in six months. With EC2, if you want to deploy something for testing or whatever, all you need is a credit card and you can get it going right away. The Nimbula guys are building a technology that provisions and manages cloud services out of your own IT resources. A lot of enterprise IT guys I talk to say their bosses point to Amazon EC2 and ask, “Why can’t you build me one of those?” Now they can.

All the layers are all getting reinvented. Some will be a service, some will be on-premise. For a new platform to emerge, a lot of things need to come together, and I think a lot of things have been in the making for a while. The environment feels as ripe as it ever has.

One of the EU’s probes was spurred by complaints from two small technology companies that IBM improperly blocks customers from using the mainframe’s operating system without IBM’s own pricey hardware. The other probe is examining whether IBM is squelching third-party providers of spare mainframe parts.

IBM is one of the world’s largest technology companies, and it has long led the market for mainframes, which are the high-end machines typically used by businesses and governments to process large quantities of data.

Concern about IBM’s supreme position in the market for heavy-duty computing goes back more than half a century. The U.S. Department of Justice reached a consent decree with IBM in 1956 that effectively established an aftermarket for used mainframes, parts and service. The consent decree lapsed in 2001. The EU itself, in an earlier mainframe probe, reached a settlement with IBM in 1984 that was designed to ensure competing mainframe companies had access to the mainframe platform. That deal lasted a decade.

Read the rest of this post on the original site

The death of the mainframe has been predicted for years, as companies opted to handle their heavy computing needs with strings of cheaper servers rather than pay a million dollars for one massive box.

The new machine, which will start shipping in September, attempts to address that challenge by letting companies use the massive computer to manage servers based on Intel Corp. or Unix technology. The software enabling the management of Unix machines will ship in the fourth quarter, and the Intel (INTC) module will come out in the first half of next year.

It took three years and a $1.5 billion in investment to produce the new machine.

Read the rest of this post on the original site

International Business Machines Corp. (IBM) is now almost alone in the market for mainframes: high-end computers that run everything from Amtrak’s reservation system to benefits payments for the Social Security Administration. Market-researcher IDC estimated that in 2008 mainframes accounted for 9.9 percent of the world-wide $53 billion server market.

Toni Sacconaghi, an analyst for Sanford C. Bernstein, estimates that IBM’s direct revenue from sales of its System Z mainframes was about $3.5 billion, or less than 4 percent, of its $103.6 billion in2008 revenue.

Read the rest of this post on the original site