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IBM results show slow transition to new business model

Cognitive is one of the cornerstones of IBM’s ‘strategic imperatives’, yet building out a portfolio of products and services will take time, IBM’s CFO admits

IBM has posted second quarter sales of $19.3bn, down 4.7% from the $20.2bn it reported in the second quarter of 2016.

In the company’s latest fiscal results, IBM reported revenue of $4.6bn in its cognitive solutions business, which includes solutions software and transaction processing software, down 2.5% for the same period last year.

Its global business services division, which includes consulting, global process services and application management, reported revenues of $4.1bn, down 3.7%.

IBM’s technology services and cloud platforms business, which includes infrastructure services, technical support services and integration software, reported revenues of $8.4bn, down 5.1%.

Systems, including systems hardware and operating systems software, reported revenues of $1.7bn, down 10.4%.

According to IBM, its so-called “strategic imperatives” grew 8%, led by the cloud and mobile practices. This was largely driven by its hybrid cloud services business, which IBM stated grew 20%.

In January 2017, the company said the move to these strategic imperatives, which include the likes of Watson, cognitive services and emerging technologies such as blockchain, accounted for 40% for earnings in 2016.

“In the second quarter, we strengthened our position as the enterprise cloud leader and added more of the world’s leading companies to the IBM Cloud,” said Ginni Rometty, IBM chairman, president and CEO.

She said the company had strengthened its position with its Watson offerings and had worked on supported emerging technologies such as blockchain. Specifically, Rometty highlighted the new IBM z14 mainframe, which she said reinvents the mainframe by enabling clients to encrypt all data, all the time.

Read more about IBM’s strategy

  • IBM’s Watson cognitive, artificial intelligence technology and its cloud strategy are overtaking core product areas in terms of revenue.
  • IBM is poised to leap forward in cybersecurity with a refreshed z Systems mainframe built to handle pervasive encryption.

As Computer Weekly has previously reported, IBM claims the new system is capable of encrypting data 18 times faster than x86 platforms, at 5% of the cost.

In a transcript on the earnings call posted on the Seeking Alpha financial website, Martin Schroeter, senior vice-president and chief financial officer at IBM, said: “Cognitive is a big business. It has a smaller impact. We see growth as a service portfolio, but it’s going to take time to build that portfolio.”

Commenting on the opportunities in IBM’s global business services division, Schroeter said: “On GBS, the word I’d give you is the transition. The signings in consulting are good. We’re engaging with our clients on digital offering.

“The application management business is a fairly stable business and, yes, we’re helping our clients move those into clouds. We’re helping them ‘contemporise’ the way those applications work, but that’s not a big growth engine, it is kind of a very stable base,” he said.

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