IBM has reported its sharpest revenue decline for five years with a 6% drop in the fourth quarter of 2020.
Chairman and CEO Arvind Krishna remained bullish that IBM’s recent strategical changes would come good by the end of the year, but the company’s latest financial report was much lower than expected.
IBM’s cloud business brought in $7.5 billion during Q4, a 10% increase from the previous quarter. Revenue from Red Hat also increased by 19%, and the firm revealed that its debt was reduced by $3.9 billion. However, this wasn’t enough to raise overall revenues, which dropped 6% with $20.4 billion brought in between October and December.
“We made progress in 2020 growing our hybrid cloud platform as the foundation for our clients’ digital transformations while dealing with the broader uncertainty of the macro environment,” said Krishna. “The actions we are taking to focus on hybrid cloud and AI will take hold, giving us the confidence we can achieve revenue growth in 2021.”
IBM’s yearly figures were just as concerning, with revenue coming in at $73.6 billion, a 5% drop from 2019. Again, Red Hat and Cloud revenues were positive but not enough to change the overall financial outlook.
The tech giant is a little bit of an anomaly in that its one of the few cloud providers to report such big losses during the pandemic. The likes of Amazon, Microsoft and Google have posted increased revenues due to the greater need for cloud computing services, and newer challengers like Alibaba have also gained market share thanks to the so-called ‘new normal’.
IBM and Krishna will rightly point to the company’s recent structural changes and acquisitions that are clearly long-term strategies. The acquisition of Red Hat is already providing revenues increases and the firm is an active buyer of hybrid cloud businesses – to date, Krishna’s tenure has seen nine acquisitions, which is roughly one for each month he has been in charge.
Ultimately, the big play is the decision to split its operation into two business units. Krishna will focus on cloud computing and a new company will deal with its infrastructure business. The spin-off is set to be completed by the end of the year but IBM might have to weather more financial turbulence in the meantime.