AMD, IBM and Intel Activity

Advanced Micro Devices Inc., IBM Corp., and Intel Corp. announced their quarterly financial results, and gave positive guidance on future financial expectations. In other news, IBM announced it was acquiring Diligent Technologies Corp.

Focal Points:

• Intel stated its first quarter revenues were $9.67 billion, an increase of nine percent year-over-year. On a generally accepted accounting principal basis (GAAP) quarterly net income was $1.44 billion, down 12 percent from in the first quarter of the previous year. Intel also claimed it had record server microprocessor revenues in the quarter, gross margins expanded by four percent, and operating income was up 23 percent year-over-year. AMD reported first quarter revenues of $1.5 billion, up 22 percent from the same quarter the previous year. On a GAAP basis the company had a net loss of $358 million, a 40 percent improvement from the previous year. AMD plans to cut its global workforce by 10 percent. Both firms are optimistic that revenues and margins, driven by their new technologies, would improve during the rest of the year.
• IBM reported its first quarter results. Total revenue for the quarter was $24.5 billion, an increase of 11 percent from the year ago quarter. On a GAAP basis net income for the quarter was $2.3 billion compared with $1.8 billion in the year ago quarter. 65 percent of the company's revenues were from outside of the U.S. IBM's Global Services businesses grew their revenues at 17 percent while Software Group revenues advanced 14 percent. Growth in those regions was in the double digits while the U.S. revenues were up only six percent. The Systems and Technology Group saw a decrease in revenues of seven percent, primarily due to a 21 percent drop in System i server revenues and a 20 percent drop in Technology sales. System z revenues gained by 10 percent, System p by two percent, and System x saw flat revenues. The revenues from the System Storage unit increased by 10 percent.
• IBM announced it was acquiring Diligent Technologies, a privately-held storage de-duplication software company based in Framingham, MA. Diligent's technologies and employees will become part of the IBM System Storage business unit of the IBM Systems and Technology Group. Financial terms were not disclosed. The firm was founded in 2002 by Doron Kempel and Moshe Yanai, both of whom came from EMC Corp. and has its development in Israel. The company has 100 employees and has products installed in 200 Fortune 500 companies. The firm's primary products are ProtecTier, an enterprise-class disk-based virtual tape software aimed at increasing storage capacity by a factor of 25, and HyperFactor, its underlying in-line data de-duplication software technology.

Experton Group believes IT investments will continue to be healthy in 2008, as the global (and U.S.) economy remains strong in all sectors outside of the financial and consumer sectors.  However, IT investments will be concentrated in those areas that enhance revenues, productivity, regulatory requirements, and security. IBM's acquisition of Diligent is a logical follow-on from its January purchase of XIV, which was also founded by Moshe Yanai, who is still a director at Diligent. IBM is gaining both needed storage products and technical talent. IT executives should be ensuring their IT purchase requests have strong business plans behind them so that the requisitions can stand up to executive scrutiny and competition from the business units for scare capital expenditures.