IBM Blames Shift To Cloud For Quarterly Revenue Decline

IBM has announced its 14th consecutive quarter of declining revenues and cut its full-year operating profit forecast.

The company attributed the revenue loss largely to a broad shift away from packaged software products to the cloud and, in the storage industry, a shift to cloud-based storage and to the flash memory typically used in mobile devices, and increasingly also in servers and laptops.

Those broad, ongoing changes affected IBM’s consulting and systems integration businesses and its storage unit, according to chief financial officer Martin Schroeter, contributing in large part to a year-on-year decline in total revenue of 13.9 percent to $19.28bn (£12.4bn), short of analysts’ forecasts of $19.62bn.

IBM is particularly exposed to such shifts due to the size of its operations related to businesses such as packaged software and disk-based, on-site memory systems. The company has in recent quarters sought to sell off low-margin units, ranging from cash registers to low-end servers, and invest in areas such as cloud-based services and data analytics.

IBM attributed about 9 percent of the decline in overall revenues to a strong US dollar, a factor that has boosted recent results from European companies such as SAP.

Mobile and cloud revenues

Other factors contributing to the lower revenues included fewer large deals in China, which caused revenues from that country to drop 17 percent, IBM said. Combined revenues from Brazil, Russia, India and China were down 30 percent from a year ago.

The company’s “strategic imperatives” or newer, higher-margin businesses, including cloud and mobile, data analytics, social software and security products, rose about 17 percent in the quarter ended 30 September, compared with the same quarter in 2014.

The company lowered its full-year operating profit forecast to a range of $14.75 to $15.75 per share from $15.75 to $16.50, at the low end of analysts’ expectations of $15.68.

IBM’s net operating earnings (non-GAAP) came to $3.34 per share, ahead of analysts’ expectations of $3.30.

At last week’s Most Powerful Women Summit in Washington, D.C. IBM chief executive Ginni Rometty acknowledged that the company is currently shrinking “by design”.

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