History (1997): $6.6 Billion in 1996 for IBM System Storage Division

IBM System Storage Division (SSD) has long kept its numbers to itself. The company still won’t bare all, but there are now some clues to give a sense of the unit’s performance. One interesting fact that is not too surprising, but has now been confirmed: Seagate Technology has moved ahead of IBM SSD.

During a recent press conference in Paris, France, European and French representatives of IBM SSD officially announced that their division had attained $6.6 billion in sales WW for 1996, a 15% rise over last years’ business, accounting for 8.7% of the total turnover for IBM Corporation ($75.9 billion).

Another figure announced by Jean M. Mathiot, SSD’s West European area manager is even more surprising, particularly since it seems somewhat elevated: SSD supposedly earned its parent company a little over one billion dollars, out of a total $5.4 billion in net income realized by IBM in 1996.

Only one other firm in the storage industry has attained such a profit ratio, the highly successful EMC, which is the most profitable enterprise in this market – not counting IBM – with $387 million of net income in 1986 for $2.28 billion in sales.

Big Blue, ≠2 of the storage industry …
Whatever else may happen, one thing is certain. Since Seagate Technology acquired Conner Peripherals, Al Shugart’s firm has become unquestionably the ≠1 business in the storage industry, forcing Big Blue to yield the lead position for the first time in the industry’s history, which amounts to nearly 45 years.

Even with a $6.6 billion turnover, IBM is behind Seagate’s $8.6 billion for the fiscal year ended June 1996.

True, IBM has been making a considerable effort to improve its production capacity, with nearly $1.6 billion invested over the past year alone, but Seagate has a comfortable lead, when one considers that, for the first quarter of 1997, the firm attained $2.5 billion in sales (for a net income of a quarter billion dollar), thus positioning the company for close to $10 billion for calendar year 1997, within the top 30 computer companies of the world! …

… And ≠4 in HDDs
IBM SSD has a giant subsystems and software business. Taking only the OEM division, a majority of which is in production and sales of HDDs, according to Michel Lapointe, in charge of France’s OEM sales, WW sales last year were $1.8 billion, which puts Big Blue behind not only Seagate, once again, but also far behind Quantum ($4.4 billion) and even Western Digital ($2.9 billion), and only slightly ahead of Maxtor ($1.3 billion).

He offers another important figure: 12 million HDDs shipped by SSD in 1996, which equals 11% of the total market, estimated at 109 million drives by IDC. Incidentally, that 11% is remarkably close to the 10.5% that IDC forecasted for IBM.

New 5-point strategy
A few other newsworthy items were released by IBM’s representatives at the press conference:

• IBM SSD’s 5-point plan for the present is as follows:
  • address storage data management rather than storage;
  • be part of the network computing revolution;
  • capitalize on the current growth in open systems;
  • maintain its technological leadership;and
  • a special goal for Europe: serve the customers.
• IBM will not offer a HDD drive at 10,000 rpm before 1998 (Seagate has a little breathing space).
• The next stepping stone after the 9GB 3.5-inch HDD will be an 18GB model.
• Almost all models of disk drives are in allocation.
• Release of a 3.5-inch 6.4GB drive with IDE DMA/33 interface is expected in May.
• SSA will remain top priority, “but IBM will follow the market” (which means it all depends on FC-AL success …). IBM developed a microprocessor prototype, the SSA 160, which doubles the current linking speed, to 160MB/s (delivery sometime next year).
• 10,000 Magstar 3590 tape drives have been shipped.
• Cartridge capacity expansion to 20GB (without compression) is expected for 3Q97.
• As a boost for its automatic tape library line, Big Blue will release a Virtual Tape Server, which includes a Unix computer with 36 or 72GB on HDDs, equipped with ADSM software functionality. Thus, before being stored on tape cartridges, data will pass through disk caches and be formatted to 3590. Conversely, this feature should quite logically simulate 3490 cartridges.
• There will soon be a 3570-type 350 cartridge automatic library for AS/400 and Unix environments (currently, the company offers only a 20 cartridge autoloader).
• Before long, IBM is expected to announce its own data sharing version of ADSM, which will allow different OSs to access the same database (EMC should make a similar announcement soon).
• A number of improvements have been made on the Ramac Virtual Array. The 2 Turbo model has increased from 32 to 128 logical channels, and should soon have 4 new supplementary I/O channels, for a potential of 8 simultaneous transfers. The Ramac Scalable Array 2 can hold up to 180 Ultrastar 2XP 9.1GB HDDs, for a maximum capacity of 1,368GB in a single rack.
• The SnapShot feature is now available on VM OSs and not only VSM systems, while its VSAM version (at the file as well as volume level) should arrive before the end of the year.

This article is an abstract of news published on the former paper version of Computer Data Storage Newsletter on issue 111, published on April 1997.

Note: For FY20, IBM storage represented only $1,873 million.