IBM Revenue Woes Continue Amid Transition

IBM reported its 11th consecutive quarterly revenue decline as it continues to focus on strategic growth areas such as cloud, analytics and more.

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IBM reported fourth quarter earnings showing another drop in revenue – the 11th consecutive quarterly revenue decline for Big Blue.

IBM announced total revenues of $24.1 billion, down 12 percent from the same quarter last year. Net income also was down. IBM had net income of $5.5 billion for the fourth quarter, down from $6.2 billion for the same time last year – a decrease of 11 percent. Big Blue saw a bit of good news in that it reported earnings per share of $5.81, higher than analyst estimates of $5.41 per share.

IBM’s revenue decline comes in the midst of its strategic transition to higher- value business opportunities and exit from lower-performing businesses like commodity servers and microelectronics. IBM sold off its System x server business to Lenovo last September and its semiconductor business to Globalfoundries in October.

“We are making significant progress in our transformation, continuing to shift IBM’s business to higher value, and investing and positioning ourselves for the longer term," said IBM CEO Ginni Rometty, in a statement. "In 2014, we repositioned our hardware portfolio for higher value, maintained a services backlog of $128 billion and achieved strong revenue growth across cloud, analytics, mobile, social and security.” Martin Schroeter, IBM’s senior vice president and chief financial officer, said the company’s strategic imperatives continue to drive strong growth, up 16 percent in 2014. “Together cloud, analytics, mobile, social and security generated $25 billion in revenue, which is 27 percent of IBM,” Schroeter said during IBM’s earnings call with analysts. “Analytics was up 7 percent on a large base. And with 60 percent revenue growth, our cloud business is substantial. It’s now $7 billion in revenue, and we exited the year with an annual as-a-Service run rate of $3.5 billion. That’s up from $2.2 billion a year ago.”

IBM recently reorganized its management infrastructure to focus more on the cloud and other strategic initiatives. IBM named company veteran Robert LeBlanc as senior vice president of Cloud. In a memo to employees, Rometty laid out IBM’s focus on the areas of Research, Sales & Delivery; Systems; Cloud; Watson; Security; Commerce, and Analytics.

Revenues from IBM’s software segment were $7.6 billion, down 7 percent compared with the fourth-quarter of 2013. Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Workforce Solutions and Rational products, were $5.4 billion, down 6 percent versus the fourth-quarter of 2013. Operating systems revenues of $557 million were down 19 percent compared with the prior-year quarter.

IBM’s Global Services segment revenues decreased 8 percent to $13.5 billion. Global Technology Services segment revenues decreased 8 percent to $9.2 billion and Global Business Services segment revenues were down 8 percent to $4.3 billion. The estimated services backlog at December 31, 2014 was $128 billion.

On the hardware front, revenues from continuing operations for IBM’s Systems and Technology segment totaled $2.4 billion for the quarter, down 39 percent from the fourth quarter of 2013. Revenues from Power Systems were down 13 percent, revenues from System z mainframe server products decreased 26 percent and revenues from System Storage decreased 8 percent from the same period last year. Meanwhile, IBM last week announced its new z13 mainframe, which the company expects to provide positive results.