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IBM's Revenue Hit by Slower Cloud, Services Businesses

IBM's Revenue Hit by Slower Cloud, Services Businesses

Enterprise & IT Apr 16,2019 0

IBM reported a drop in quarterly revenue on Tuesday, as the company is trying pivot to newer businesses such as cloud, analytics, software and services.

IBM has shed many of its traditional hardware businesses and beefed up the growth areas through deals such as its $34 billion deal for Red Hat Inc, the company’s biggest acquisition.

The company returned to annual revenue growth after seven years in the last quarter of 2018.

IBM's revenue slipped 4.7 percent to $18.18 billion in the first quarter ended March 31.

Revenue from four of its business segments fell year-over-year. The company’s net income fell $1.59 billion, or $1.78 per share, compared with $1.68 billion, or $1.81 per share, a year earlier.

During the first quarter:

  • Cloud & Cognitive Software (includes cloud and data platforms, cognitive applications and transaction processing platforms) -- revenues of $5.0 billion, down 2 percent (up 2 percent adjusting for currency), led by cognitive applications, up 2 percent (up 4 percent adjusting for currency), and by cloud and data platforms, down 2 percent (up 2 percent adjusting for currency).
  • Global Business Services (includes consulting, application management and global process services) -- revenues of $4.1 billion, flat year to year (up 4 percent adjusting for currency), with growth in consulting and global process services. Gross profit margin increased 280 basis points.
  • Global Technology Services (includes infrastructure and cloud services and technology support services) -- revenues of $6.9 billion, down 7 percent (down 3 percent adjusting for currency), with growth in hybrid cloud revenue. Gross profit margin increased 110 basis points.
  • Systems (includes systems hardware and operating systems software) -- revenues of $1.3 billion, down 11 percent (down 9 percent adjusting for currency), with growth in Power, offset by the impact of the IBM Z product cycle dynamics and weakness in Storage.
  • Global Financing (includes financing and used equipment sales) -- revenues of $406 million, flat year to year (up 4 percent adjusting for currency).

"In the first quarter, our cloud revenue growth accelerated, and we again grew in key, high-value areas in Cloud and Cognitive Software and in consulting,” said Ginni Rometty, IBM chairman, president and chief executive officer. "IBM’s investments in innovative technologies coupled with our industry expertise and our commitment to trust and security position us well to help clients move to chapter two of their digital reinvention."

"Our results reflect the fundamental changes we have made to our business, allowing us to generate greater operating leverage. In the first quarter, we significantly expanded profit margins, led by our services businesses," said James Kavanaugh, IBM senior vice president and chief financial officer. "Our focus on prioritizing our investments in the emerging high-value segments of our industry has enabled us to drive higher profitability and strong cash generation."

For the full 2019, the company expects GAAP diluted earnings per share of at least $12.45, and operating (non-GAAP) diluted earnings per share of at least $13.90.

Tags: IBMfinancial
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