For Q1 2015 IBM reported flat revenues year on year and operating income slightly up on last year, due in part to currency impacts and some of the recent restructuring efforts at the firm, respectively. But the company also reported strong performance in its ‘as-a-service’ segment.
The company reported strong growth in its Power and mainframe businesses, with quarterly mainframe revenue more than doubling (with particularly strong growth in China). The company said Power showed strong performance in the scale-out systems market as well, in part due to the expansion of Power architecture in SoftLayer datacentres.
But at $19.6bn in the first quarter of 2015 revenue at dropped for the 12th consecutive quarter at IBM if a stronger dollar and the impact of divested businesses are taken into consideration.
The company’s chief financial officer Martin Schroeter aimed to reassure the market that bold moves to invest in new areas like Internet of Things and restructure its business were having a positive impact.
IBM is spending billions to shift its focus on lower-margin strategic initiatives like cloud, big data, mobile, security and IoT, and is continuing to “rebalance” its workforce at the same time.
“As we continue the transformation of our business, I’d expect a similar level of workforce rebalancing next quarter, which will impact our year-to-year profit performance,” Schroeter said.
“At our investor briefing at the end of February, we spent a lot of time on how we are transforming our business to where we see long-term value in enterprise IT. We have a core portfolio that’s high value to our clients and high value to us. Quite frankly, it’s essential.”
“While the market for these capabilities isn’t necessarily growing, we continue to reinvent and innovate to deliver that value,” he added.
But performance in areas of strategic importance for IBM looks promising. Schroeter said the annual “as-a-service” run rate stands at $3.8bn, up $1.5bn in the last year. Cloud revenue was up over 75 per cent from last year; on a trailing 12-month basis, the company reported cloud revenue of $7.7bn, with analytics up more than 20 per cent and social more than 40 per cent.