IBM Q4 Revenues Down, Strategic Imperatives Up

By Darryl K. Taft  |  Posted 2016-01-20 Print this article Print
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In addition, with nearly $18 billion of analytics revenue, Schroeter said IBM also is "the largest analytics provider," and the company will extend that lead by moving into new areas, including Watson Health and Watson Internet of Things.

Looking at the various segments of the company, revenues from the software segment were down 11 percent to $6.8 billion, compared with the fourth quarter of 2014. Revenues from IBM's key middleware products, which include WebSphere, Information Management, Tivoli, Workforce Solutions and Rational products, were $4.9 billion, down 10 percent year-to-year. Operating systems revenues of $0.5 billion were down 12 percent year-to-year.

"Our software profit performance continues to reflect the revenue trajectory, a higher level of investments in areas like Watson, Watson Health, IoT and Bluemix, and an impact from currency translation," Schroeter said. "On an annual basis, about 70 percent of our software business is annuity-like, including software-as-a-service, and subscription and support. Our renewal rates are steady, our SaaS business is growing, and our overall annuity revenue grew in the fourth quarter and the full year."

Revenues from IBM's Systems Hardware segment totaled $2.4 billion for the quarter, down 1 percent year-to-year. However, revenues from z Systems mainframe server products increased 16 percent compared with the year-ago period. Total delivery of z Systems computing power, as measured in mips, increased 28 percent. Revenues from Power Systems were up 4 percent compared with the 2014 period. And revenues from System Storage decreased 11 percent.

"This was the fourth consecutive quarter of growth in both z Systems and Power," Schroeter said. "We have continued to deliver innovation to our systems to enable them to run the most contemporary workloads. In fact, about half of our systems segment revenue in 2015 was to address analytics workloads, or hybrid and private clouds. This quarter z Systems revenue was up more than 20 percent. Since the launch of z13 [mainframe] in the first quarter of 2015, we have delivered growth of 35 percent, with strong double-digit growth in every quarter since the launch. z13 was contemporized for the workloads around mobile, hybrid cloud and analytics, which continues to resonate well with our existing customers, and brings new customers to the platform. For the year, we added 50 new clients across 25 countries."

For its services business, IBM's Global Technology Services segment revenues were down 7 percent to $8.1 billion. Big Blue's Global Business Services segment revenues were down 10 percent to $4.3 billion. Yet, the estimated services backlog as of December 31 was $121 billion, up 1 percent year-to-year, adjusting for currency.

"We ended the fourth quarter with a services backlog of $121 billion, which grew for the third consecutive quarter," Schroeter said. "We continue to see momentum in our services offerings that modernize our clients' IT systems and move their operations into the cloud-based mobile world."

Moreover, Schroeter said that since IBM announced its enterprise mobility partnership with Apple, Big Blue has generated more than a billion dollars in services signings from the program.

Yet, "things could obviously be better in IBM's traditional businesses, though there were some bright points," King noted. "In particular, I'd point to the solid performance of both the z Systems mainframe and Power Systems groups. It's also worth considering the effects that the strong U.S. dollar has had on IBM's performance. IBM certainly isn't alone in that regard—other global vendors are feeling similar pain. But it's notable that one effect of an increasingly connected world is that the suffering in once-dynamic economies can inflict pain on businesses thousands of miles away."


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