IBM revenue drop in Q2 indicates need for better strategy

IBM revenue Q2 2017Business technology major IBM posted 5 percent drop in revenue to $19.3 billion in the second quarter of 2017.

“In the second quarter, we strengthened our position as the enterprise cloud leader and added more of the world’s leading companies to the IBM Cloud,” said Ginni Rometty, IBM chairman, president and chief executive officer.

Drop persisted despite a reported 5 percent increase in revenue from strategic imperatives and 15 percent increase in cloud revenues, indicating revenue challenges to more traditional business units drove these overall revenue declines, according to Stephanie Long, research analyst at TBR.

IBM segments

Cognitive Solutions revenues were $4.6 billion (–2.5 percent).

Global Business Services revenues were $4.1 billion (–3.7 percent).

Technology Services & Cloud Platforms revenues were $8.4 billion (–5.1 percent).

Systems revenues were $1.7 billion (–10.4 percent).

Main focus areas

Cloud revenues increased 15 percent to $3.9 billion. Cloud revenue over the last 12 months was $15.1 billion. The annual exit run rate for as-a-service revenue increased to $8.8 billion from $6.7 billion in the second quarter of 2016.

Revenues from analytics increased 4 percent. Revenues from mobile increased 27 percent and revenues from security increased 4 percent.

IBM leans on Watson and cognitive as growth drivers for cloud and software, according to Molly Gallaher Boddy, analyst at TBR. “Vertical-specific cloud solutions enhanced with Watson capabilities help IBM weather software license declines”

IBM’s Cloud revenue reached $3.9 billion for the second quarter, with an as-a-service run rate of $8.8 billion. Though IBM’s software revenue of just over $6 billion declined slightly from 2Q16, TBR estimates that IBM bolstered its software performance with a 2Q17 SaaS growth of 24 percent.

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