Although IBM's PC servers fell flat last quarter, its software business soared, especially in "branded middleware." IBM's Cognos BI tools, WebSphere middleware, and Lotus collaboration software all displayed double-digit increases.

IBM's latest quarterly financial results, announced yesterday, showed revenue growth of 11% to $24.5 million for the first quarter of 2008, with gains across most categories, including software, services, vertical markets and most of IBM hardware systems, but weak spots in IBM's System x PC hardware and System i midrange servers.

The software division's 14% year-over-year growth rate to $4.8 billion for the quarter "was led mainly by branded middleware, including the growth from the acquisition of Cognos," said Patricia Murphy, IBM's VP for investor relations, during a conference call with press and analysts yesterday.

Murphy cited a 16% growth rate for IBM's middleware overall, encompassing growth of 27% for information management software, including products from the recently acquired Cognos; 20% for WebSphere middleware; 17% for Lotus messaging and collaboration software; 9% for Tivoli systems management products; and 3% for IBM's Rational development tools.

The Cognos buyout, unveiled last November, cost IBM a hefty $4.9 billion. But although officials didn't come out and say so yesterday, the acquisition appears to have been right "on the money" for helping to fuel growth in IBM's services, vertical markets, and hardware systems, as well.

"The services market has shifted to one which favors shorter time to value. Clients are focused on a faster payback driven by proven value propositions, and there is no shortage of opportunities for opportunities that meet those characteristics," Murphy noted during the call.

Soon after announcement of the Cognos buyout, the business intelligence (BI) specialist seemed to make clear that it was a "proven value proposition," highlighting a number of existing customers in vertical markets at a recent press conference in New York City that also featured introductions of 16 new Cognos products. On the Systems and Technology side, however, IBM's overall revenues of $4.2 billion for the first quarter reflected a 2% drop from the same quarter last year, excluding the impact of IBM's divestiture of its Printing Systems Division in June 2007.

System z mainframe products rose 10%, System p Unix servers by 2%, and system storage products by 10%. But System x hardware was flat year-over-year, and System i servers actually fell by 21%, Murphy said.

"We are not pleased with performance in a couple of areas, specifically System x and OEM Technology," according to the IBM VP.