IBM's cloud earnings grow, while overall revenues shrink

Q2 2016 results show that "strategic imperatives" are paying off

IBM's revenues in areas such as cloud computing and analytics rose in the second quarter of its financial year, despite an overall dip in growth.

Revenue from public, private and hybrid cloud grew by 30 per cent in Q2 2016, while mobile revenue went up by 43 per cent. Analytics revenue also had a slight uptick of four per cent, while security revenue was up by 18 per cent.

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"IBM is pioneering new business opportunities beyond the traditional IT marketplace," said IBM CEO Ginni Rometty. "And we continue to invest for growth with recent breakthroughs in quantum computing, Internet of Things and Blockchain solutions for the IBM Cloud."

The results indicate that IBM's "strategic imperatives" are paying off. The company has been making significant investments cloud technologies, big data and artificial intelligence, as companies move away from legacy infrastructure.

In total, these imperatives grew by 12 per cent, while the company's overall revenue dipped by three per cent. IBM's cloud business and strategic imperatives now make up over half of its revenue.

However, as the revenue dip shows, an increase in IBM's cloud revenues is not enough to completely plug the gap in its finances caused by the steep decline in its legacy hardware business, and the company's systems division reported a revenue reduction of 23 per cent.

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TechMarketView analyst Kate Hanaghan noted that while IBM is going in the right direction, it needs to be careful about its pace.

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"Wrestling with the balance between legacy and emerging IT services revenue is an industry-wide challenge," she said. "We believe IBM has the right approach but this level of transformation takes time - especially when you're moving into (and creating) new markets."

Hanaghan added: "To become the type of supplier that will be around (and will thrive) for years to come, you have to be different and be disruptive. However, you must also show patience - something that shareholders are less likely to do."

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