By Paik Ji-young  jyp@ddaily.co.kr

The Digital Daily

IBM Korea sold 7,200 units of servers during the first quarter of this year, which reportedly dropped to 5,600 during the second quarter and 4,500 during the third quarter.

Until last year, IBM Korea maintained a strategy to secure a higher margin by concentrating on the sales of high-end servers, such as four-socket x86s and higher models, based on its technical superiority acquired through mainframe and Unix systems.

But the superior position that the IBM brand enjoyed does not seem to work in the market any more since the technology for x86 servers and other products has been leveling off.

The company is taking aggressive offensives in terms of price this year to increase the sales of 2-socket servers and servers of lower grade as a way to expand business.

But the situation seems not easy. Sales performance of IBM’s integrated systems, including the PureFlex system loaded with a x86 server, has not been impressive, either. On the contrary, its rival Oracle is enlarging its market share by continuously increasing the sales of integrated systems such as Exadata. 

In addition, the departure of key personnel from IBM and the news of selling IBM business to Lenovo also seem to affect its product sales.

In fact, the global x86 market now needs a new long-term strategy to meet the changing buying patterns of client companies. Internet companies, including Google, Facebook and Amazon, were the biggest clients of x86 servers but they no longer purchase brand servers.

Instead, they are using servers designed by themselves through smaller companies such as OEM manufacturers in Taiwan. The same trend is witnessed in the Korean market, mainly among large enterprises, portal sites and hosting companies.

Meanwhile, IBM Korea has also seen a slowdown in storage business, which is its priority business. According to provisional estimates by IDC, the company recorded the sales of 13 billion won in storage business during the third quarter of this year, which is a whopping 17 percent decline from the second quarter.

In terms of capacity of sold systems, its sales decreased by more than 3 percent to 8,500 terabytes (TBs) amid the continuous growth in the demand of storage in the market thanks to an increase in data traffic.

Up until now, IBM has completed a storage portfolio through continuous merger and acquisitions (M&As).

Most recently, it acquired the flax memory maker Texas Memory Systems (TMS) and is focusing on the all-flash storage market. But an array of too many products makes it difficult for the company to choose a certain products and concentrate on them.

The negative image of past IBM storage product, the Shark, and people’s perception that IBM systems are expensive but often cause complications are also a hurdle to overcome. 

In the case of Unix servers, IBM Korea is enjoying the largest share of the market but the market itself is shrinking because of the continuing trend of downsizing to x86 platforms due to such IT issues as virtualization, cloud computing and big data.