System Z sales were down 37 percent, when compared to a very strong quarter a year ago. Sales of MIPS (Microprocessor without Interlocked Pipeline Stages) mainframe systems declined 26 percent, also compared to a very strong quarter a year ago. Sales of Power systems declined 31 percent. While the company continues to ship Power systems, the greater efficiency of the newer systems reduces the size of the systems being shipped, lowering revenue for IBM, Schroeter said. System X sales were down 15 percent.
Pure systems, a new offering introduced last year, provided one bright spot on the hardware side. IBM shipped more than 2,500 Pure systems in the past quarter, and 10,000 since launch.
Another area of concern for IBM has been sales in China, which declined by 23 percent, chiefly in hardware sales.
A large part of this decline came from a broad-reaching Chinese government economic reform initiative, which has stalled state agency IT purchases. This initiative also slowed sales in IBM's last quarter as well.
"While there is more clarity in the overall plan, we continue to believe it will take some time for business in China to improve," Schroeter said.
In contrast, revenue in Japan grew by 4 percent, and has grown for the past five quarters. Schroeter attributed this success to IBM's capability to shifting market focus and investment to meet current needs in IT.
In the past few weeks IBM announced two major initiatives. The company plans to invest an additional $1.2 billion to beef up its cloud infrastructure. It has also launched a new business group focused on providing Watson-style cognitive computing capabilities to help organizations make better use of their large amounts of data.
The company is planning on both initiatives to lead to substantial business over time.
"We believe that data as a natural resource will drive demand going forward, and big data analytics will provide the basis for competitive differentiation," Schroeter said.
Data analysis is now "nearly a $16 billion" annual business for the company, he said. Cloud business accounts for $4.4 billion in revenue for the company, of which $1.7 billion was delivered as a cloud service.
IBM continued to perform well for investors. This quarter, the company posted earnings per share of $5.73, a 12 percent increase over EPS of $5.13 for the fourth quarter of 2012. For the year, earnings were $14.94 per share compared with $14.37 per share in 2012, a 4 percent increase.
The company is still on track to reach $15 per share by 2015, Schroeter said.