IBM Drops NetApp, Opts For Own Storage Units

IBM is to halt the reselling of NetApp storage units in an effort to move its customer base onto its own appliances.

The move comes as Big Blue seeks to reinvigorate flagging sales of its hardware equipment.

End Of The Road

According to an internal memo, reviewed by Bloomberg, IBM is to formally withdraw from selling NetApp’s new ‘N series’ systems on 27 May. It is also shutting down all development of the product line.

The memo reportedly says that instead clients will be “encouraged” to buy IBM-made offerings.

The move is likely to hit the bottom line of NetApp, as it reportedly gets two percent of its revenues from IBM. And the halt to the reselling agreement (created back in 2005) is apparently news to the storage firm, as it says that IBM has not informed it of the move. NetApp did admit however that its relationship with IBM has had its “challenges”.

The move is not much of a surprise, as it comes amid a difficult period for the storage industry in general, as companies contend with falling hardware sales, not helped by the growing uptake of cloud-based storage services.

Hardware Headaches

Likewise IBM’s hardware sales have been struggling. Last month, IBM revealed its eighth straight quarter of revenue decline. Net income was $2.4 billion (£1.5bn), down 21 percent from the same period a year ago. Total revenues were $22.5 billion (£13.4bn), down four percent from the first quarter of 2013.

The decline in hardware sales was mostly to blame, as it took a heavy toll on IBM’s first quarter earnings. The company said that its hardware revenues had dropped an alarming 23 percent, compared to the same period one year ago.

Earlier this month, chief executive Virginia Rometty admitted that IBM prepares for a rocky time going forward. She added that the company faces challenges from the growth of public cloud services, which are eating into its sales of hardware, software and services for enterprise data centres.

IBM is of course selling off major parts of its business, including the currently in-progress sale to Lenovo of its x86 server business for $2.3 billion (£1.4bn).

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