IBM Reports 3Q Revenue Decline as Transformation Continues

For the third quarter of 2015, IBM reported another revenue decline as the company continues for transform to strategic businesses.

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IBM reported third-quarter revenues of $19.3 billion, down 14 percent from the same period in 2014. Net income for the quarter fell to $3 billion from $3.5 billion in the third quarter of 2014, down 14 percent.

IBM's quarterly results took heavy hits in both hardware, down 39 percent, and software, down 10 percent. The company's services units also saw declines.

Yet, if there is a silver lining in all this, it is IBM's cloud business, which grew more than 65 percent year-to-date as IBM continues to transform its mix of offerings to higher-value solutions.

"In the third quarter, we again made progress in the transformation of our business to higher value, with strong growth in our strategic imperatives and expanded operating margins," Ginni Rometty, IBM chairman, president and CEO, said in a statement. "We are continuing to make significant investments to build platforms around analytics, cloud, mobility and security that lay the foundation for a new era of cognitive business—where we see long-term value for our clients and shareholders."

Revenues from the company's strategic imperatives—cloud, analytics and engagement—increased 17 percent year-to-year and 20 percent year-to-date. Total cloud revenues (public, private and hybrid) increased more than 45 percent (or more than 65 percent, when adjusted for currency and the divested System x business) year-to-date—and reached $9.4 billion when tallied over the trailing 12 months, IBM said.

The annual run rate for cloud delivered as a service—a subset of total cloud revenues—increased to $4.5 billion from $3.1 billion in the third quarter of 2014. Moreover, revenues from business analytics increased 9 percent year-to-date. And revenues year-to-date from mobile more than quadrupled, while revenues from security increased 6 percent and revenues from social increased 32 percent.

"Like most global IT vendors, IBM is facing a number of headwinds in its traditional businesses," said Charles King, principal analyst at Pund-IT. "These range from economic uncertainties in core overseas markets to the impact of a strong U.S. dollar on sales to fundamental technological evolution and its effects on competition.

"Unlike some competitors, the company hasn't simply hunkered down or indulged in baseless optimism," King continued. "Instead, IBM identified core future opportunities, including analytics, hybrid cloud, cognitive computing and IoT, and has continuously invested the funds necessary to bring these initiatives to life. The significant growth these areas enjoyed in the past quarter is a testimony to IBM's vision and its management's willingness to think and act according to long-term imperatives."

IBM saw its revenues decline across different regions. IBM revenues in the Americas totaled $9.1 billion, a 10 percent drop from 2014. Revenues from the Europe, Middle East and Africa, or EMEA, region were $6.1 billion, down 16 percent, and the Asia-Pacific saw revenues drop 19 percent to $4.1 billion. Revenues from the BRIC countries—Brazil, Russia, India and China—fell 30 percent.