IBM Posts More Declines Despite Cloud Progress

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Bad news for shareholders. Fifteenth consecutive revenue fall as Big Blue continues painful migration to cloud

IBM’s corporate ‘transformation to higher value’ continues as both profits and sales declined yet again.

The latest financial results marks Big Blue’s 15th consecutive quarter of declining revenues, despite the supposed growing popularity of its cloud products.

Decline By Design

IBM chairman, president and chief executive officer Ginni Rometty has previously acknowledged that the company is currently shrinking “by design”.

And Big Blue is certainly shrinking, as both profit and revenue fell in the fourth quarter and year-end.

For the last quarter IBM posted net income from continuing operations of $4.5bn (£3.2bn),down 19 percent from the same year ago quarter. Sales declined 9 percent to $22.1bn (£15.6bn).

There was equally dire news for the full year ending 31 December, IBM posted net income of $14.7bn (£10.4bn), down 12 percent. And revenues came in at $81.7bn (£57.5bn), down 12 percent.

IBM“We continue to make significant progress in our transformation to higher value,” insisted Ginni Rometty.

“In 2015, our strategic imperatives of cloud, analytics, mobile, social and security grew 26 percent to $29bn (£20.4bn) and now represent 35 percent of our total revenue,” said Rometty. “We strengthened our existing portfolio while investing aggressively in new opportunities like Watson Health, Watson Internet of Things and hybrid cloud.

“As we transform to a cognitive solutions and cloud platform company, we are well positioned to continue delivering greater value to our clients and returning capital to our shareholders,” she concluded.

Despite the positive spin on the results, and Rometty’s insistence that Big Blue is declining by design, Wall Street as would be expected, reacted negatively to results. IBM shares fell by more than 3 percent in after-hours trading.

To be fair, IBM’s results have been impacted by the strong US dollar at the moment, but even taking into account the currency impact, it is clear that IBM is struggling to make up the decline in its traditional hardware, software and services businesses, with growth in new areas such as data analytics and cloud computing.

IBM now operates 46 cloud data centres around the world and its cloud business grew by 57 percent in 2015. The company has invested heavily these in new growth areas, and the hope it that these will generate the long-term income needed to restore IBM’s fortunes.

Time will tell.

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Author: Tom Jowitt
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