Mainframe fails to save IBM from 13th declining quarter

IBM's second-quarter revenue was down 13% year-on-year to $20.8bn, but IBM said the decline is only 1%, adjusting for the sale of its x86 server business and the impact of the strong dollar

IBM’s second-quarter financial results were buoyed by sales of its new mainframe, but overall revenues and profits were down for a 13th consecutive quarter.

Revenue was down by 13% to $20.8bn, but IBM said that adjusting for the sale of its x86 server business to Lenovo and the impact of the strong dollar, revenue would have declined by only 1%.

“Our revenue was down less than 1% in the quarter, and essentially flat for the first half, excluding the impact of currency and the divested businesses,” said Martin Schroeter, IBM’s chief financial officer.

“Our overall revenue performance includes the continued translation impact from a strong dollar, and the impact of divested businesses. Together these reduced our reported revenue growth by 12 to 13 points, both for the quarter and the half,” he said.

Second-quarter net income from continuing operations was $3.5bn, down by 17% compared with the same period a year ago.

IBM said its net income was “significantly impacted” by a strong dollar and an increase in “workforce rebalancing” charges, which refers to IBM’s ongoing job cuts and redeployment exercises.

Revenue from IBM’s Global Technology Services division was down by 10% to $8.1bn, but adjusting for the currency effect and the sale of the x86 server business, revenues were up by 1%, IBM said.

Software revenue was $5.8bn, down by 10% compared with the same period a year ago, or just 3% adjusting for the currency effect, said IBM.

Hardware revenue fell by 32% to $2.06bn, but without the x86 declines and the currency impact, IBM said hardware sales were up 5%.

Mainframe sales were up by 9% due to IBM’s new z13 mainframe, released in March 2015, but without the currency effect this would have been 15%, IBM said.

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Analysts said mainframes continue to be popular among organisations running extremely computational-intensive applications, such as firms in the financial services, telecommunications and insurance sectors.

Revenue from critical growth areas such as cloud and analytics were up by more than 20% compared with the same period a year ago. Revenues for IBM’s cloud business alone increased by more than 50%, or 70% excluding the currency effect.

Analysts said most US multinationals have seen their sales affected in 2015 by the strong dollar, which tends to make products more expensive to the export market.

IBM said it expected third-quarter revenue to be the same as revenue from the first quarter, or about $19.6bn.

IBM’s share price fell by around 5% in after-hours trading, according to the Telegraph.

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