IBM is advancing rapidly into new fields like data analytics, cloud computing and mobile applications. And while the giant technology company's second-quarter results showed encouraging progress in those businesses, it was not enough to translate into growth for the company as a whole.
IBM reported Monday that its revenue declined 13 per cent in the quarter, the 13th consecutive quarter of slipping revenue. A large part of the decline - 9 percentage points - came from the currency impact of a strong dollar.
Most of IBM’s business is overseas. The falloff is partly by design as the company emphasises profits rather than sales growth, shedding less profitable businesses like industry-standard data center computers, a unit it sold to Lenovo of China last fall.
But some of the decline reflects the erosion of IBM’s traditional hardware, software and services businesses, which still account for two-thirds of the company’s business, analysts estimate. The second-quarter revenue fell just short of the average estimate of Wall Street analysts of $20.9 billion, as compiled by Thomson Reuters.
IBM reported a 17 per cent decline in net income to $3.5 billion. It delivered earnings per share from continuing operations of $3.84 a share. That was above the consensus estimate of analysts of $3.78 a share. In after-hours trading,
IBM shares were down about 4 per cent.
IBM reported that revenue from the newer businesses it calls “strategic initiatives” grew at a brisk 30 per cent in the quarter. In that group, cloud computing revenue rose more than 70 per cent, excluding the effect of currency fluctuations, and IBM’s large data analytics business grew by more than 20 per cent.
IBM was helped in the quarter by one of its stalwart products, mainframe computers, as a new model - the z13 - began shipping in January, giving its hardware business a cyclical lift. Mainframe revenue rose by 15 percent, without the currency impact. Sales of the big machines themselves contribute modestly to IBM financially, representing an estimated 2 per cent of the company’s total revenue. Yet mainframe technology as a whole - including mainframe software, storage, maintenance and financing - remains vital to the company, strategically and financially.
That mainframe-related business as a whole accounts for 24 per cent of total IBM revenue and 36 per cent of profits, according to estimates of AM Sacconaghi, an analyst at Bernstein Research. Virginia M. Rometty, IBM’s chief executive, said the financial results “demonstrate that we continue to transform our business to higher value,” and pointed to the “strong growth” in the new fields.
New York Times
