Big Blue’s ‘transformation’ continues to be work in progress as revenue and profits fall once again
IBM’s management team have talked up the firm’s cloud and cognitive solutions, but the cold hard light of Wall Street’s fiscal scrutiny has revealed another quarterly decline in both sales and profits.
IBM is a company attempting to reinvent itself in the face of ongoing pressure from decreasing hardware and stagnating software earnings.
Indeed, chairman, president and chief executive officer Ginni Rometty has previously acknowledged that the company is shrinking “by design”, as part of its refocusing on the cloud and analytics.
But the first quarter earnings revealed that IBM’s corporate ‘transformation to higher value’ continues to take a toll on Big Blue.
For the three months ending 31 March, it had posted net income of $1.7 billion (£1.4bn), down from $2 billion (£1.6bn) in the same year-ago quarter. There was equally depressing news on the revenue front, as sales fell to $18.2 billion (£14.2bn) from $18.7 billion (£14.6bn) a year ago.
Analysts had been expecting sales of $18.39 billion (£14.4bn).
It is worth noting that this is now the 20th consequential quarter of shrinking revenues for Big Blue, and therefore its shares fell 4.7 percent to $162 (£126) in trading on Tuesday.
“In the first quarter, both the IBM Cloud and our cognitive solutions again grew strongly, which fueled robust performance in our strategic imperatives,” said Rometty.
Rometty was right to point to IBM’s cognitive solutions performance, as it was the only unit to post a rise in the past three months.
The cognitive solutions division posted revenues of $4.1 billion (£3.2bn), up from $4.1 billion (£3.2bn), driven by growth in analytics and security, which include Watson-related offerings.
But all of IBM’s other units struggled.
The Business Services division for example posted revenues of $4bn (£3.1bn), down from $4.1bn (£3.2bn).
The tech services and cloud unit meanwhile posted revenues of $8.2bn (£6.4bn), down from $8.4bn (£6.6bn) a year ago. IBM did say however that first-quarter cloud revenues had increased 33 percent to $3.5bn (£2.7bn).
Hardware continues to flatline with revenue at the Systems unit coming in at $1.4bn (£1.1bn), down from $1.7bn (£1.3bn)