IBM's Long Decline Continues, Despite Cloud Growth

Scott Ferguson
10/17/2017

IBM's third-financial quarter results offered a mixed view of the company's ongoing transformation. While cloud revenue grew 25% annually to $15.8 billion, and the company managed to beat Wall Street expectations for the quarter, Big Blue also posted its 22nd consecutive quarterly revenue decline.

Results were good enough to push the company's stock in after-hours trading by about 5%, following the October 17 announcement.

For the third quarter, IBM posted non-GAAP revenue of $19.2 billion and earnings per share of $3.30. Financial analysts were looking for revenue of $18.6 billion and earnings per share of $3.28, according to CNBC.

Still, non-GAAP net income stood at $3.1 billion -- a 2% year-over-year decline. Revenue, while beating expectations, dropped about 1% year-over-year.

Mainframes are now cool, and profitable, again
(Source: IBM)
Mainframes are now cool, and profitable, again
(Source: IBM)

There were several bright spots within the IBM report, including the company's strategic imperatives section, which includes analytics, cloud, mobile and security. For the last 12 months, revenue has totaled $34.9 billion, a 10% increase. Third quarter revenues were up about 11% to about $8.8 billion.

IBM's cloud revenue now totals $15.8 billion for the last 12 months, a 25% year-over-year increase. For the quarter, revenue increased 20% to $4.1 billion.

The strategic imperatives section now accounts for about 45% of all IBM revenue.

"In the third quarter we achieved double-digit growth in our strategic imperatives, extended our enterprise cloud leadership, and expanded our cognitive solutions business," CEO Ginni Rometty wrote in the announcement.

Even IBM's legacy systems got into the act during the quarter. The company's systems divisions, which includes System z mainframes and storage, posted revenue of $1.7 billion, a 10% year-over-year increase. Much of this was driven by the release of the z14 System in July. (See IBM Brings Big Iron to the Big Cloud.)

"It's been reinvented for the cloud and cognitive era, including blockchain," Martin Schroeter, IBM's senior vice president and CFO, said of the mainframe during a call with analysts.


Keep up with the latest enterprise cloud news and insights. Sign up for the weekly Enterprise Cloud News newsletter.


The Cognitive Solutions division, which includes the company's investments in artificial intelligence, posted revenues of $4.4 billion, a 4% year-over-year increase. However, the Global Business Services division saw its revenue fall 2% to about $4.1 billion. In addition, the Technology Services & Cloud Platforms division, which includes infrastructure services, technical support services and integration software posted revenues of $8.5 billion, which was a 3% decline.

In an email to clients, Patrick Moorhead, president and principal analyst for Moor Insights & Strategy, noted that IBM's struggles in certain areas reflect bigger issues within the industry, especially with the shift to cloud and new technologies such as AI.

"IBM isnt alone in the challenge of filling declining traditional enterprise revenue with 'digital transformation' revenue like cloud, mobile, social, cognitive and security. HPE, Cisco Systems, and Dell EMC are in a very similar position, attacking the problem differently," Moorhead wrote.

In addition to its quarterly numbers released Tuesday, IBM also noted it expects to deliver earnings per share of $13.80 for the year. Wall Street analysts put that number at $13.75.

Related posts:

— Scott Ferguson, Editor, Enterprise Cloud News. Follow him on Twitter @sferguson_LR.

(13)  | 
Comment  | 
Print  | 
Oldest First  |  Newest First  |  Threaded View        ADD A COMMENT
Page 1 / 2   >   >>
maryam@impact
[email protected]
10/19/2017 | 10:35:27 AM
Turning Big Blue into more green
Scott the numbers reflect that while big blue is still facing challenges it is investing in the future and trying get traction in the emerging and current tech markets. It is never easy for large companies with long-standing infrastructures but it can be done. As the cloud market shakes out it will be interesting to see who gets which part of that market and which providers just fade away.
Scott_Ferguson
Scott_Ferguson
10/19/2017 | 10:38:51 AM
Re: Turning Big Blue into more green
@maryam: You are very right on all those counts. I think the one thing that was interesting here is that IBM was close this to breaking the revenue losing streak and some of the financial reports that came after seemed to indicate that. I think IBM may be close to figuring it out.

 
maryam@impact
[email protected]
10/19/2017 | 10:46:49 AM
Re: Turning Big Blue into more green
Scott, I agree they did not wait until they couldn't turn the ship as many other giants have. It's very possible that they will have a healthy financial future if they continue their focus on the evolving tech landscape and invest appropriately.
Susan Fourtané
Susan Fourtané
10/19/2017 | 6:48:58 PM
Re: Turning Big Blue into more green
It seems like it’s a time for transition for IBM as it moves into new technologies such as Blockchain. This is going to be interesting to watch, both the evolution into new technologies and what I believe it will be a financial recovery.
maryam@impact
[email protected]
10/20/2017 | 2:00:11 PM
Re: Turning Big Blue into more green
Susan agreed their moving in the right direction so if the focus continues they could very well claim a share of the market.
Susan Fourtané
Susan Fourtané
10/21/2017 | 10:38:50 AM
Re: Turning Big Blue into more green
Indeed, Maryam. Also, IBM had jumped into the Blockchain wagon, and is using a very interesting password security protocol.
maryam@impact
[email protected]
10/24/2017 | 12:47:59 PM
Re: Turning Big Blue into more green
Susan say more sounds very interesting.
kq4ym
kq4ym
10/26/2017 | 10:47:37 AM
Re: Turning Big Blue into more green
While it's always hard to predict the future, IBM has the resources I would guess to recover from any temporary downturns while searching for ways to improve the bottom line among it's numerous business opportunities including moving along with the cloud transitions.
Phil_Britt
Phil_Britt
10/27/2017 | 9:22:31 AM
Re: Turning Big Blue into more green
Though IBM has the resources, as you point out, the downturn has been anything but short-term. It takes a long time to turn around a big ship.
Susan Fourtané
Susan Fourtané
10/27/2017 | 11:03:45 PM
Re: Turning Big Blue into more green
Maryam, This is the abstract from an IBM Research paper: Passwords are inherently vulnerable to dictionary attacks, but are quite secure if guessing attempts can be slowed down, for example by an online server. If this server gets compromised, however, the attacker can again perform an offline attack. The obvious remedy is to distribute the password verification process over multiple servers, so that the password remains secure as long as no more than a threshold of the servers are compromised. By letting these servers additionally host shares of a strong secret that the user can recover upon entering the cor- rect password, the user can perform further cryptographic tasks using this strong secret as a key, e.g., encrypting data in the cloud. Threshold password-authenticated secret sharing (TPASS) protocols provide exactly this func- tionality, but the two only known schemes by Bagherzandi et al. (CCS 2011) and Camenisch et al. (CCS 2012) leak the password if a user mistakenly executes the protocol with malicious servers. Authenticating to the wrong servers is a common scenario when users are tricked in phishing attacks. We propose the first t-out-of-n TPASS protocol for any n > t that does not suffer from this shortcoming. We prove our protocol secure in the UC frame- work, which for the particular case of password-based protocols offers important advantages over property-based definitions, e.g., by correctly modeling typos in password attempts.
Page 1 / 2   >   >>
More Blogs from Scott Ferguson

For the last several years, CIOs and IT professionals have been wrestling with two specific issues as they work toward a cloud-centric future: Agile IT and the rush toward digital transformation. While enterprises want to keep innovating, finding a starting point and knowing which projects to tackle first remain a major obstacle.

To get a better handle on Agile IT and digital transformation, Light Reading Managing Editor Scott Ferguson recently spoke to two experts in these fields: Dan Kearnan, senior director of marketing for cloud at SAP, and Roy Illsley, a distinguished analyst with Ovum.

From its roots in industrial farm machinery and other equipment, John Deere has always looked for a technological edge. About 20 years ago, it was GPS and then 4G LTE. Now it's turning its attention to AI, machine learning and IoT.
Artificial intelligence and automation will become more integral to the enterprise, and 90% of all apps will have integrated AI capabilities by 2020, according to Oracle CEO Mark Hurd.
IBM is now offering access to Nvidia's Tesla V100 GPUs through its cloud offerings to help accelerate AI, HPC and other high-throughput workloads.
CIO Rhonda Gass is spearheading an effort to bring more automation and IoT to the factories making Stanley Black & Decker tools and other equipment.
Featured Video
Upcoming Live Events
November 5, 2019, London, England
November 7, 2019, London, UK
November 14, 2019, Maritim Hotel, Berlin
December 3-5, 2019, Vienna, Austria
December 3, 2019, New York, New York
March 16-18, 2020, Embassy Suites, Denver, Colorado
May 18-20, 2020, Irving Convention Center, Dallas, TX
All Upcoming Live Events