IBM has reported healthy growth for its cloud and strategic imperatives business units, despite witnessing revenue declines for the 16th straight quarter.
The strategic imperatives units, which include the cloud, analytics, mobile, social and security services, delivered $29.8 billion in revenue over the last 12 months, accounting for 37% of total revenues, with cloud accounting for $10.8 billion.
“We delivered $18.7 billion in revenue, $2.3 billion in net income and operating earnings per share of $2.35,” said Martin Schroeter, CFO at IBM. “Importantly, we also made significant investments and took significant actions to accelerate our transformation and move our business into new areas.”
Specifically in Q1, total revenues for the group dropped by 5% to $18.7 billion, the strategic imperatives unit grew 14% to $7 billion, with cloud accounting for $2.6 billion, a 34% year-on-year increase. The company also announced or closed ten acquisitions during the quarter, investing just over $2.5 billion in new businesses including Bluewolf, a Salesforce partner, Truven, a provider of cloud-based healthcare data and The Weather Company’s digital assets.
While the company built its reputation in the traditional IT market segment, sliding revenues and enterprise attention to cloud solutions has enforced a transformation play for the tech giant, which would appear to paying off well.
“We’re continuing to expand our Watson ecosystem and reach,” said Schroeter. “Over the last 12 months, the number of developers using Watson APIs is up over 300% and the number of enterprises we’ve engaged with has doubled. Watson solutions are being built, used, and deployed in more than 45 countries and across 20 different industries.”
Watson would appear to be one of the main focal points for IBM’s new cloud-orientated business model, as the cognitive computing platform has formed the basis of numerous PR campaigns throughout the year, highlighting client wins from pharmaceutical giant Pfizer and the McLaren Honda Formula One team.
“Our enterprise clients are looking to get greater value from their data and IT environment,” said Schroeter. “They’re not just focused on reducing cost and driving efficiency but using data to improve decision-making and outcomes. They’re looking to become digital enterprises that are differentiated by Cognitive. We’re creating Cognitive Solutions that marry digital business with digital intelligence. We’re bringing our industry expertise together with these cognitive solutions and we’re building it all on cloud platforms”
Geographically, the company highlighted business was relatively consistent worldwide, though the Asia-Pacific region did demonstrate growth. EMEA and North America demonstrated slight declines, though there have been improvements from previous quarters, though Latin America continued to prove tough for IBM. The company does have a large business unit in the region, though it quoted volatile economic and political environments in Brazil, as reasoning for declines.
Although the company has not halted the revenue declines which have been a constant for IBM in recent years, the strategic imperatives units would appear to be taking a stronger role in fortunes of the business. IBM has grown its capabilities in numerous developing markers in recent months, including cloud video platforms and user experience, though it does appear to be backing cognitive computing for future growth.
“As we build new businesses in areas like Watson Health and Watson Internet of Things, this requires different skills and to be in different places,” said Schroeter. “I mentioned earlier that over the last year we’ve added over 6000 resources in Watson Health and added over 1000 security experts. These are specialized skills in highly competitive areas. So this is not about reducing our capacity; this is about transforming our workforce.
“So where are we in the transformation? It is continued focus on shifting our investments into those strategic imperatives, it is making sure that the space we’re moving to is higher margin and higher profit opportunity for us and then making sure we’re investing aggressively to keep those businesses growing.”
While IBM is not out of the woods yet, the recent quarterlies did beat analyst predictions and its acquisition activities would appear to be more aggressive than others in the space. The company is seemingly not wasting any time in positioning itself firmly in the cloud space, though it does appear executives are backing the growth of cognitive computing, and Watson’s market penetration in particular, as the catalyst for future success of Big Blue.