IBM's Q2 Results Show Growth in Cloud, Cognitive

By Darryl K. Taft  |  Posted 2016-07-18 Print this article Print
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IBM's Technology Services & Cloud Platforms segment, which includes infrastructure services, technical support services and integration software, saw revenues of $8.9 billion, down 0.5 percent. However, growth of 35 percent in strategic imperatives revenue within the segment was driven by strong hybrid cloud infrastructure services performance.

The IBM Systems segment, which includes systems hardware and operating systems software, saw revenues of $2 billion, down 23.2 percent. And revenues from the IBM z Systems mainframes was down 40 percent, in line with the IBM mainframe product cycle, Schroeter said. Indeed, the Systems segment revenue always reflects z Systems product cycle dynamics. Moreover, gross profit margin improved in both z Systems and IBM Power systems.

And, finally, IBM's global financing segment saw revenues of $424 million, down 11.3 percent.

Large companies are really hard to pivot, but if they weren't pivoting they'd be in crisis, said Rob Enderle, founder of the Enderle Group and longtime IBM watcher.

"It takes some time for the new revenues to catch up with the losses from the old, but as time goes on the disparity between the base numbers balances out and we call the pivot done," he said. "Right now IBM is effectively two companies—one growing and one in decline. And in IBM's century of existence that has been the case a number of times. Such is the nature of long-term firms."

Chris O'Malley, CEO of Compuware, which sells software to support IBM mainframe users and developers, said the good news about IBM's earnings is that there was no real news on the mainframe.

"The mainframe continues to be a backbone of the worldwide economy and customers that have been historically dependent on the platform continue to be. Today their numbers for the IBM z were down some 40 percent, which was in line for this point in the cycle. But our new bookings for this quarter were up 20 percent," he said, noting that the mainframe continues to be vibrant and that Compuware's business follows behind IBM's product cycle.

Meanwhile, despite a series of layoffs this year, IBM also added 30,000 new jobs during the first half of this year. In an email to IBM employees obtained by eWEEK, Rometty wrote:

"In the second quarter we also continued to make meaningful progress in how IBMers work and contribute to this success. With Checkpoint, all IBMers are getting and giving faster and more frequent feedback. 130,000 IBMers have been trained in agile, 70,000 IBMers have chosen to work with Mac products, and more than 250,000 IBMers are using Box. Almost all IBMers participated in Cognitive Build, helping 20,000 colleagues collaborate on nearly 3,000 cognitive start-up projects. And we continue to invest in our people, with IBMers benefitting from nine million hours of learning in the first half, and with more than 30,000 new IBMers joining the company."

King said he believes IBM appears to be dealing effectively with the critical challenges coming from technological, economic and demographic shifts in its core businesses and markets.

For his part, IBM's Schroeter said IBM's "workforce rebalancing," which is how IBM describes its layoffs, is about "rebalancing skills more than capacity reduction."

IBM continues to overhaul its workforce to address the emerging demands of its customers as both IBM and its customer base transforms.

"They're trying to change a tire in a moving car; it's a hard effort that they're trying to do," O'Malley said.


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