IBM Outlines Q2 Comeback

After an uncharacteristically disappointing first-quarter performance, IBM has fingered Dell as a primary culprit behind Big Blue's lackluster sales this year.

Speaking to an audience of VARs at Arrow's Support Net May Days event in Indianapolis, Donn Atkins, general manager of IBM Global Business Partners, and Towney Kennard, vice president of IBM Americas Business Partners, explained what the technology giant is doing to correct some "miscues" from the first quarter, and how it plans to take back server market share from Dell. "We had some slippage of some business from first quarter to second quarter," Kennard said. "That happened in our channel business and in our direct business."

Specifically, he said IBM struggled with its xSeries Intel-based eServer product line, as well as its storage business. While the problems with IBM storage were chalked up to internal transitions, Kennard said the villain that had cut into xSeries' sales and market share was none other than Dell. While Dell is most often known as Hewlett-Packard's nemesis, Kennard said that the direct computer-maker had eaten into IBM's eServer business. "We woke up one of those sleeping giants," he said. "It's a price war with Dell now."

To fight back, IBM officials introduced new incentives for xSeries and an expansion of its bid-certification program to cover low-end and blade servers. In addition to 2 percent rebates for xSeries server sales, IBM plans to shorten the response time for its bid-certification process and promote SystemSeller--IBM's program to provide resellers with consistent, everyday pricing for volume products and eliminate special pricing conflicts. "Donn and I are working very hard on protecting the investments our value partners make from a low price dropping in on the deal," Kennard said.

Atkins said that Dell was stealing share with its direct model, rather than swaying VARs to drop IBM and sell Dell. He added that the Q1 performance was "a pause," and that the company was getting back on track. "I think we have a great partner model," Atkins said. "I still have more work to do with special bids, but we think the SystemSeller approach gives us a framework."To help improve its xSeries sales and win back some of the Intel-based server market, IBM is enlisting Support Net. Eric Williams, executive vice president at Support Net, says the distributor will concentrate on turning more IBM resellers on to the xSeries product line while providing training and certification to help them add value to the sales. "It's all about customer expansion," Williams says. "A lot of people look at an Intel box and think it's just a volume play, but it's not."

Williams says Support Net VARs have been increasing their xSeries sales recently, but the numbers are coming from a relatively small percentage of them. Indeed, several VARs at the event said they were seeing more success with IBM's pSeries and iSeries eServer products. Thus, the distributor has diligently promoted four-way, eight-way and blade Intel-based eServers to such partners.

"We'll continue to focus on the high end, where Dell has backed away," Williams says. "But Dell is obviously out there, and they're aggressive."