IBM Counts On Its Cloud And Platform For The Turnaround

IBM (Nasdaq: IBM) has been focusing on its strategic imperatives segment to drive the next level of growth. The segment includes the cloud, analytics, mobile, social, and security services. But the turnaround is taking a lot longer than expected. After three consecutive quarters of revenue growth, IBM revenues seem to be back on the decline. In an earlier streak, IBM had reported revenue declines for five straight years. The market is losing patience and post the result announcement, IBM’s stock fell 2% in the after-hours trading session.

IBM’s Financials
Revenues for the first quarter fell 4.7% to $18.18 billion, missing the Street’s forecast of $18.46 billion. Its net income also declined to $1.59 billion, or $1.78 per share, compared with $1.68 billion, or $1.81 per share, a year earlier. On an adjusted basis, IBM earned $2.25 per share and was ahead of the market’s expectations of $2.22 per share. IBM attributed the miss in revenues to its declining hardware business and currency headwinds.

By segment, Cognitive-solutions and technology services and cloud-platform revenues came in at $11.91 billion, falling short of the market’s expected $12.43 billion. Within the segment, cloud and cognitive solutions revenues which include analytics, cybersecurity, and artificial intelligence, fell 1.5% to $5.04 billion but managed to beat the analyst estimates of $4.18 billion.

Global business services revenues were flat at $4.12 billion and also fell short of the analyst estimates of $4.19 billion. Systems revenues fell to $1.33 billion, missing the market’s forecast of $1.37 billion. It ended the quarter with global financing revenues coming in flat at $406 million. IBM is divesting some of its other businesses such as the mortgage servicing business. It reported revenues from these segments as part of Other revenues that ended the quarter with $417 million.

IBM did not report the revenues from its strategic imperatives. But, it did mention that the annual exit revenue run rate for cloud-delivered services increased 10% to $11.7 billion.

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