Revenue from sales of IBM’s (NYSE: IBM) System z mainframe server products rose 41% last quarter. Data Center Group revenue at Intel (NASDAQ: INTC) rose 32% in the last quarter. The Intel division improvement helped boost the chipmaker’s net income by 29% to $3.2 billion. The mainframe improvement helped IBM’s net income move higher by 10% to $2.9 billion.
The advance in the sales of the two companies probably cannot be sustained, at least not in the core hardware businesses.
The surge in hardware sales is due to increases in business investment as the recession has ended. That build-up will only go so far as the need for next generation products is fulfilled. The move toward distributed computing based on “cloud” solutions will also continue to push businesses toward less expensive servers. Improved vitualization software will have a similar impact. The march toward software driven solutions should not be masked by a temporary improvement in hardware sales.
Intel remarked that cloud applications would help sales of products like its Xeon chips. Smaller, more powerful chips will accelerate the trend. That is only so if there is not an improvement in the way that software improves hardware efficiency–something that has gone on for years. Betting against software advancement is a dangerous game, especially when software company earnings are based on the efficiency that they bring to the computing model.
Douglas A. McIntyre
Take Charge of Your Retirement In Just A Few Minutes (Sponsor)
Retirement planning doesn’t have to feel overwhelming. The key is finding expert guidance—and SmartAsset’s simple quiz makes it easier than ever for you to connect with a vetted financial advisor.
Here’s how it works:
- Answer a Few Simple Questions. Tell us a bit about your goals and preferences—it only takes a few minutes!
- Get Matched with Vetted Advisors Our smart tool matches you with up to three pre-screened, vetted advisors who serve your area and are held to a fiduciary standard to act in your best interests. Click here to begin
- Choose Your Fit Review their profiles, schedule an introductory call (or meet in person), and select the advisor who feel is right for you.
Why wait? Start building the retirement you’ve always dreamed of. Click here to get started today!
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.
You can follow him investing $500,000 of his own money on our top AI stocks for free.