IBM sees Red Hat as key to hybrid cloud strategy

IBM’s second-quarter 2019 results show a 4.2% decline in revenue, but the supplier is betting big on hybrid cloud and cognitive computing

IBM has reported revenues of $19.2bn for the second quarter of 2019, a 4.2% decline from the same quarter in 2018.

Revenue in its cloud and cognitive software business, however, which includes cloud and data platforms, cognitive applications and transaction processing platforms, rose by 3.2% to $5.6bn. The company said it had seen 5% growth in cloud and data platforms and 3% growth in cognitive applications. It reported 2% growth in its transaction processing platforms.

“In the second quarter, we continued to grow in the high-value areas of the business, led by a strong performance across our cloud and cognitive software segment,” said Ginni Rometty, IBM chairman, president and chief executive officer.

“With the completion of our acquisition of Red Hat, we will provide the only true open hybrid multicloud platform in the industry, strengthening our leadership position and uniquely helping clients succeed in chapter two of their digital reinventions,” she said.

Revenue in IBM’s global technology services business, which includes infrastructure, cloud services and technology support services, declined 6.7% to $6.8bn. It also reported a 19.5% decline in revenue in its systems business, which includes systems hardware and operating systems software, to $1.8bn.

During the earnings call, IBM’s chief financial officer, Jim Kavanaugh, said its Red Hat acquisition represented an important milestone for IBM and one that would significantly affect the cloud landscape.

“It is clear that the next chapter of cloud will be about shifting mission-critical work to the cloud and optimising everything from supply chains to core banking systems. This requires a hybrid, multicloud, open approach to provide portability, management consistency and security for these enterprise workloads,” he stated in a transcript of the earnings call posted on the Seeking Alpha financial blogging site.

When asked about the Red Hat deal, Kavanaugh said the acquisition would be part of IBM’s cloud and cognitive software business, which he claimed would change the hybrid cloud market.

“We’re helping our clients as they move their hybrid cloud applications to the cloud and also on data and AI [artificial intelligence]. But we’re also seeing very good growth in our integration offerings and our hybrid cloud data platforms that are driving our data, our analytics, and our AI capability going forward,” he said.

Read more about hybrid clouds

  • The hybrid cloud model promises a lot, but enterprises really need to take their time when working out what applications and workloads to run where – or they will find themselves on a hiding to nothing.
  • When done properly, hybrid infrastructure can deliver efficiency, cost savings and performance, but with so many options available, good advice from a channel partner is key to achieving these benefits.



Next Steps

IBM's partner ecosystem chief eyes Red Hat's global expansion

Read more on Infrastructure-as-a-Service (IaaS)

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