Published in Cloud

IBM has surprise revenue drop

by on17 October 2018

Mainframe sales slow

Big Blue has reported a bigger-than-expected drop in revenue caused by slowing software sales and wavering demand for mainframe servers.

Chief Executive Officer Ginni Rometty has been refocusing International Business Machines Corp toward faster growing cloud and analytics services to lower dependence on its traditional hardware products and reverse years of revenue declines.

The outfit’s overall revenue slipped two percent in the third quarter ended September, with almost all of its businesses missing Wall Street’s revenue estimates.

The systems unit, which includes mainframe servers and data storage systems sold to large organisations, climbed only a per cent, compared with a 25 percent jump in the previous quarter.

Sales growth of z14 mainframe servers, introduced about a year ago, have slowed as customers await the launch of new machines before they upgrade.

IBM’s cognitive software business, which houses artificial intelligence platform Watson, analytics and cybersecurity services, had sales of $4.15 billion, down six percent from a year earlier.

To be fair some of the issues were seasonal factors affecting demand for software such as transaction processing platforms hurt revenue.

IBM Chief Financial Officer James Kavanaugh said in an interview, adding that there were signs demand was recovering.

“We have a good pipeline in transaction processing software as we enter the fourth quarter”, he said.

IBM, which gets over 60 percent of its revenue from outside the United States, said a stronger dollar also weighed on results.

The company said it made $39.5 billion in revenue over the last 12 months from its “strategic imperatives” — high-growth businesses including cloud services that are spread across its divisions.

Overall revenue slipped to $18.76 billion, missing analysts’ average estimate of $19.10 billion.

Net income fell to $2.69 billion, from $2.73 billion a year earlier. On a per-share basis, earnings rose to $2.94 from $2.92 due to a lower number of outstanding shares.


Last modified on 04 January 2019
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