IBM Sharpens Its Focus On Services BusinessIBM Sharpens Its Focus On Services Business

IBM's become even more dependent on its services business now that it has sold its PC operations. However, the company won't stray too far from its computer hardware and software roots--it's acquiring an electronic-forms developer and this week will introduce its latest big-iron mainframe.

IBM Global Services, which accounts for half of the company's revenue, posted disappointing results in its first quarter. But it rebounded strongly in the quarter ended June 30. The unit's revenue in the period, in constant currency, increased 4% year over year to $12 billion. Though the increase was modest, the results revealed a number of positive trends: New contract signings increased 45% to $15.5 billion, and the company signed 18 services deals larger than $100 million.

IBM Global Services also is getting a management makeover. John Joyce, Global Services head, is leaving for the private-equity firm Silver Lake Partners. In his place, IBM veterans Ginny Rometty, Mike Daniels, and Bob Moffat will lead the $46 billion unit. The change reflects CEO Sam Palmisano's desire for more executive focus on the unit's various moving parts.

To bolster its software business, IBM last week said it will acquire PureEdge Solutions Inc., a maker of E-forms based on the XForms standard that IBM will integrate with its portfolio of collaboration technologies. PureEdge has products tailored for the government, banking, insurance, and health-care markets and other industries that use E-forms to comply with regulatory requirements.

In hardware, IBM this week will unveil its newest mainframe, which analysts expect to be an upgrade to the high-end zSeries 990 system. CFO Mark Loughridge last week blamed a weak second-quarter performance in IBM's mainframe business on the impending launch. The business could use a lift: Mainframe sales declined 24% year over year.