IBM grows in cloud and data analytics but overall revenue slides

The company’s acquisitions are beginning to pay off

IBM’s revenue continued to decline in the second quarter but growth in some of its strategic initiatives like cloud computing and data analytics suggest that the company may be on track in its transition plans.

The Armonk, New York, company said Monday that revenue from its new “strategic imperatives” like cloud, analytics and security increased by 12 percent year-on-year to US$8.3 billion.

That increase was, however, lower than the growth the company had reported in these businesses in the first quarter.

Cloud revenue – public, private and hybrid – grew 30 percent in the second quarter, while revenue from analytics grew 4 percent, revenue from mobile increased 43 percent and the security business grew 18 percent.

Over the last 12 months, strategic imperatives delivered close to $31 billion in revenue, and now accounts for 38 percent of the company's revenue, said Martin Schroeter, IBM senior vice president and chief financial officer, in a conference call.

The company has benefited from its over 20 acquisitions over the last year but has also seen some solid organic growth, he added.

IBM had set a target for itself of $40 billion or 40 per cent of its revenue by the end of 2018. The company doesn't need to grow at this rate in these businesses in order to get to the target, Schroeter said.

As it makes the transition to cloud and other technologies, the company plans to increase spending in areas like the capabilities of its Watson platform, its cloud data center capacity and acquisitions.

IBM has been expanding its Watson cognitive platform to newer areas, including a new cloud-based version of the cognitive technology trained on security.

The gains in the new focus businesses did not help to make up for dips in other revenue streams of the company. As a result, IBM’s overall revenue in the quarter fell by 3 percent to over $20 billion. IBM has posted revenue declines for many quarters.

Its profit in the quarter, according to generally accepted accounting principles, was $2.5 billion, down 29 percent year-on-year.

IBM’s systems revenue, for example, was down 23 percent in the quarter to $2 billion, while its Global Business Services, including consulting, global process services and application management, brought in revenue of $4.3 billion, down 3.0 percent from a year earlier.

Revenue for the company’s z Systems mainframes was down 40 percent in the quarter while margins improved, “consistent with where we are in the product cycle.”

Schroeter said. IBM acquired EZSource in the quarter to help developers quickly and easily update mainframe applications.

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