Cloud fuels IBM’s first quarter of growth since 2018

Year-on-year revenue creeps up by 0.1% to $21.8 billion while Red Hat growth ballooned by 24%

IBM has pinned its first quarter of growth for more than a year on the changing fortunes of its cloud division, following five  consecutive quarters of declining revenue.

The technology giant grew by 0.1% in the final quarter of 2019 versus the same period the previous year, recording revenues of $21.8 billion (£16.7 billion). This can be attributed to a 21% rise in total cloud revenue, which hit $6.8 billion.

Full year revenue for 2019 declined by 3.1%, however, dropping from $79.6 billion (£60.9 billion) in 2018 to $77.1 billion (£59 billion) last year.

"We ended 2019 on a strong note, returning to overall revenue growth in the quarter, led by accelerated cloud performance," said IBM chairman, president and CEO Ginni Rometty in a statement.

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"Looking ahead, this positions us for sustained revenue growth in 2020 as we continue to help our clients shift their mission-critical workloads to the hybrid cloud and scale their efforts to become a cognitive enterprise."

Its open source software subsidiary Red Hat, for which IBM closed its $34 billion (£26 billion) acquisition last year, also grew by 24% year-on-year. The company now forms part of IBM’s cloud and cognitive software division, which in total grew by 8.7% to record revenues of $7.2 billion (£5.5 billion).

The firm initially submitted a bid to acquire Red Hat in late 2018 in order to enhance its hybrid cloud portfolio.

The move was largely seen as a shock and was branded a potential disaster by Puppet’s vice president of ecosystem engineering Nigel Kersten. However, these latest figures seem to prove the naysayers wrong.

"In 2019, we continued to invest in the higher-value growth areas of the industry and took bold actions – including several divestitures and a major acquisition – to position our business, which are reflected in our strong gross margin performance," added IBM’s senior vice president and CFO, James Kavanaugh.

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"After completing the acquisition of Red Hat, and with strong free cash flow and disciplined financial management, we significantly deleveraged in the second half."

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Elsewhere, in terms of IBM’s performance in the fourth quarter of 2019, its global business services division declined by 0.6%. Its global technology services, meanwhile, including infrastructure and cloud services as well as support services, dropped a sharper 4.8%.

IBM's systems division, however, sustained an impressive growth of 16%, which translated to revenues of $3 billion (£2.29 billion). The main culprit was IBM Z, which alone saw a staggering 62% growth year-on-year.

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