On April 18, IBM released the first quarter results of 2017 and its not a happy picture. The overall revenue declined by 2.8 percent and this is the 20th straight quarter that has seen year-over-year revenue declines for the company.
IBM reported a total revenue of $18.16 billion this quarter and this is 2.8 percent less than the revenue of $18.68 billion it generated during the same period in 2016. It also feel short of analysts’ expectations as they were looking for a revenue of around $18.39 billion.
The net income for this period was $1.75 billion and this is way short when compared to$2.01 billion it reported a year ago. Also, the GAAP earnings per share is $1.86 compared to $2.09 last year. Due to these results, the stock price of IBM fell by five percent during the after-hours trade.
Though these results looks bleak and dismal, they’re actually not. Over the last few years, IBM has been making strategic changes for its businesses. In fact, it’s the newer initiatives like analytics, cloud computing and artificial intelligence that have generated positive results for the company. These new initiatives represent $7.8 billion of the company’s total revenue and this has registered a 12 percent increase when compared to the first quarter of last year.
In fact, cloud can be the real savior for IBM here. The company a revenue of $3.5 billion in this quarter and this is a 33 percent increase year-over-year. This goes to show that there is a lot of change happening in terms of IBM’s operations and it’s its past businesses that are slowing it down.
In many ways, this result shows some important trends that are happening in this industry now. There is a clear shift towards cloud technologies and any company that doesn’t want to ride this trend is sure to be left behind.
Also, this reflects that there is a growing demand for technologies like cloud and cognitive computing, and this reflects the changing nature of the IT industry as a whole. Gone are the days when we were focusing on software products. Today, we want to have everything as a service that can be used on a demand basis.
For example, when we wanted to use a tool like Adobe photoshop, we had to buy a CD and install it in our system a decade ago. Today, you can simply pay a subscription, go online, use the tool and save your files on the cloud. This goes to show how much we have evolved as a society and how well we have adapted to these changes.
Going forward, IBM should focus more on these emerging technologies as they are likely to be the revenue drivers and generators over the next decade.
In short, IBM’s results was a mixed bag as the ghosts of its past businesses are pulling it down, but the newer business areas are doing exemplarily well. This simply reflects the changing nature of business and how IBM is adapting to this change.