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Cloud Rises But Overall Revenue Down for IBM

Mitch Wagner

Despite strong growth in cloud and other emerging business, IBM saw its overall revenue decline for the 18th consecutive quarter in financial results reported Monday.

Overall, IBM reported $19.23 billion revenue from continuing operations, down 0.3% year-over-year, with non-GAAP diluted earnings per share of $3.29, beating expectations of $3.23, for the third quarter 2016 ending September 30. Net profit was down 4% to $2.9 billion.

IBM's forward-looking so-called "strategic imperatives" -- comprising cloud, analytics, mobile and security -- were a bright spot in the overall lackluster results. Strategic imperatives revenue was $8 billion in the quarter, up 16% year-over-year. Over the last 12 months, strategic imperatives delivered nearly $32 billion in revenue, representing 40% of IBM, said Martin Schroeter, IBM senior vice president and CFO, reading from a prepared statement on the earnings call.

Cloud revenue was $3.4 billion in the quarter, up 44% year-over-year. That's a run rate of $12.7 billion over the last 12 months, with cloud-as-a-service -- a subset of overall cloud revenue -- hitting $7.5 billion annual run rate in the quarter, up 66% year-over-year.

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What's the problem for IBM? Its global business services segment pulled in $4.2 billion, down 2% year-over-year, as growth in its digital practices were offset by declines in traditional consulting areas. And systems brought in $1.6 billion, down 21% year-over-year.

Schroeter singled out blockchain as an area of future growth. Blockchain is technology for building a distributed ledger -- keeping a secure record of any kind of transaction -- that runs across the Internet; it's a key technology underlying Bitcoin but its potential applications go beyond the digital currency.

"We believe blockchain has the potential to do for trusted transactions what the Internet did for information," Schroeter said. IBM is working with more than 300 clients on blockchain. These include CLS Group, which does multi-currency cash settlements, and settles $5 trillion per day in the currency markets; and Bank of Tokyo-Mitsubishi, which is implementing smart contracts to manage service level agreements and automate multi-party transactions."

IBM traded at $150, down 3.08% after hours.

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— Mitch Wagner, Follow me on TwitterVisit my LinkedIn profile, Editor, Light Reading Enterprise Cloud

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