21 Jul IBM Revenue Falls 13% Despite Big Gains in New Fields
IBM is advancing rapidly into new fields like data analytics, cloud computing and mobile applications. And while the technology company’s second-quarter results showed encouraging progress in those businesses, it was not enough to translate into growth for the company as a whole.
Virginia M. Rometty, IBM’s chief executive, declared months ago that 2015 would be a year of transformation with ambitious initiatives and formidable challenges. The second-quarter performance showed both forces at work.
IBM reported on Monday that revenue from the newer businesses it calls “strategic initiatives” grew a brisk 30 percent in the quarter, excluding the effect of currency fluctuations. In that group, cloud computing revenue rose more than 70 percent, using that same calculation, and IBM’s data analytics business grew by more than 20 percent.
But the company’s overall profit and revenue declined, even after accounting for operations sold off and the currency impact of a strong dollar. Most of IBM’s business is overseas.
The fundamental issue for IBM is whether growth in the new fields can offset the erosion in its traditional hardware, software and services business — and when.The major trends in technology are often both an opportunity and a threat to IBM. The most notable is the shift to software being delivered from remote data centers as a cloud service, which can curb demand for IBM’s traditional software and undermine its pricing power with corporate customers.
As evidence of the challenge, analysts pointed to IBM’s big software business, whose sales fell 10 percent in the quarter, to $5.8 billion, or down 3 percent without the currency impact.
“IBM’s legacy business is under a lot of pressure, said A. M. Sacconaghi, an analyst at Bernstein Research. “And at the same time, the company is investing in the new businesses to get them going. So profits suffer.”