IBM Revenue Decline Continues Despite Cloud & Analytics Growth

IBM’s corporate ‘transformation to higher value’ is not without pain as the firm once again posted another declines in revenues.

IBM 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, as hardware earnings continue to fall.

And IBM’s fourth quarter and year-end results provide ample evidence of this, despite the fact that in some areas, its results beat Wall Street expectations.

Sales Decline

For the fourth quarter ending 31 December, IBM posted a still healthy net profit of $4.5bn (£3.7bn), up from $4.46bn (£3.6bn) in the same year ago quarter.

Quarterly revenues however fell to $21.7bn (£17.6bn) from $22bn (£17.9bn) a year earlier, but beat analysts’ expectations of $21.64bn (£17.5bn).

That decline was reflected in the year-end figures, which showed that IBM reported a still respectable profit of $11.8bn (£9.6bn), but which was substantially down from a profit of $13.2bn (£10.7bn) a year ago.

Annual revenues likewise also declined to $79.9bn (£64.8bn) compared to $81.7bn (£66.3bn) in 2015.

It is clear from the breakdown of the IBM figures that certain units are performing better than others.

IBM’s ‘Cognitive Solutions’ unit for example reported a modest increase in revenue, but this was tempered by a small revenue decline for the ‘Global Business Services’ division.

Meanwhile revenue at the ‘Technology Services & Cloud Platforms’ division rose nicely, but this was cancelled out by a notable fall in ‘System’ (i.e. hardware) revenues.

Cloud Strength

“In 2016, our strategic imperatives grew to represent more than 40 percent of our total revenue and we have established ourselves as the industry’s leading cognitive solutions and cloud platform company,” said Rometty,

“IBM Watson is the world’s leading AI platform for business, and emerging solutions such as IBM Blockchain are enabling new levels of trust in transactions of every kind,” she added. “More and more clients are choosing the IBM Cloud because of its differentiated capabilities, which are helping to transform industries, such as financial services, airlines and retail.”

Nevertheless, some investor concern remains as IBM’s decline has been ongoing now since 2011, and IBM Watson has yet to contribute a significant revenue stream to the firm, despite all its press coverage.

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