IBM focuses on investment, posts drop in revenue and profit

IBM CEO Ginni Rometty
IBM CEO Ginni Rometty will continue to invest in pioneering new business opportunities beyond the traditional IT marketplace as the company posted 3 percent drop in revenue to $20.2 billion in Q2 2016.

Net income of IBM dipped 29 percent to $2.5 billion.

The good news is that IBM’s revenue from focus areas increased 12 percent to $8.3 billion. Cloud revenue of IBM was $3.4 billion (+30 percent).

“In the second quarter we delivered double-digit revenue growth in strategic imperatives, driven by innovations in areas such as analytics, security, cloud video services and Watson Health, all powered by the IBM Cloud and differentiated by industry,” said IBM CEO Ginni Rometty.

“We continue to invest for growth with recent breakthroughs in quantum computing, Internet of Things and Blockchain solutions for the IBM Cloud,” Ginni Rometty said.

In the first half of 2016, IBM closed 11 acquisitions for more than $5 billion and invested nearly $2 billion in capital expenditures.

Sanjay Medvitz, research analyst at TBR, said: “IBM’s software business pursues long-term growth through the expansion of its high growth areas for analytics applications, and hybrid cloud. IBM has focused on re-positioning its legacy middleware and management solutions to enable hybrid cloud growth with enhanced analytics, automation and integration capabilities across clouds.”

IBM said its revenues from strategic imperatives — cloud, analytics and engagement — increased 12 percent year to year.

IBM said its Cloud revenues — public, private and hybrid — increased 30 percent. Cloud revenue over the trailing 12 months was $11.6 billion. The annual run rate for cloud as-a-service revenue — a subset of total cloud revenue — increased to $6.7 billion in Q2 from $4.5 billion in the second quarter of 2015. Revenues from analytics increased 5 percent. Revenues from mobile increased 43 percent. IBM revenue from security increased 18 percent.

IBM revenue from segments

IBM revenue from Cognitive Solutions — software and transaction processing software —  rose 3.5 percent to $4.7 billion. Cloud revenue within the segment grew 54 percent.

Global Business Services — consulting, global process services, application management — revenues fell 2 percent to $4.3 billion. Strategic imperatives revenue within the segment was up 14 percent, said IBM.

IBM created $8.9 billion (–0.5 percent) revenue from Technology Services & Cloud Platforms — infrastructure services, technical support services, integration software. Growth of 35 percent in strategic imperatives revenue within the segment was driven by strong hybrid cloud infrastructure services performance.

IBM revenue from Systems — systems hardware and operating systems software – fell 23.2 percent to $2 billion. Revenue reflects z Systems product cycle dynamics; gross profit margin improved in both z Systems and Power.

Global Financing revenue of IBM was $424 million (–11.3 percent) in the second quarter of 2016.

Baburajan K
[email protected]

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