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IBM Says its Cloud Business Now Worth $19.5B, “No Comment” on Divestitures

"I am not going to comment on any further actions"

By CBR Staff Writer

IBM reported Q1 revenue that declined in nearly every segment, blaming currency headwinds, cyclical factors and focussing instead on more positive profitability metrics.

The company also ditched its “strategic imperatives” metric – areas the company had focussed on, including analytics and security – in its first quarter earnings, telling investors “the strategic imperative metric has passed its course”.

Revenue overall was $18.2 billion, down 4.7 percent, but gross profit margin was up 100 basis points. The results sent shares down three percent.

CFO James Kavanaugh said a predicted sales pipeline had not materialised during the quarter: “We had a good pipeline during the quarter [but] based upon client buying decisions, did not execute… But we got off to a a solid start.”

Read this: IBM’s Sebastian Krause on Cloud, COBOL and Containers at the Edge

One sweet spot for the company was cloud – increasingly its focus.

“We have a trailing 12 month $19.5 billion cloud business that’s growing 12 percent” said Kavanaugh; a solid figure that brings IBM closer to the upper echelon of cloud providers. He added: “Over the last several months, we’ve talked about the next chapter of Cloud, which focuses on shifting mission critical work to the cloud and optimizing everything from supply chain to core banking systems.”

“To address this opportunity, enterprises need to be able to move and manage data, services and workflows across multiple cloud and on-prem… we have been reshaping our business to address this opportunity, investing heavily to build capabilities across our business, like IBM cloud, IBM cloud private and IBM cloud private for data, the IBM multi-cloud manager, cloud garages, cloud migration services and cloud optimized systems. These are the innovations that are driving our $19.5 billion of cloud revenue.”

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IBM Earnings Call: “No Comment” on Asset Sales

That “reshaping” has already involved some divestments, but IBM’s CFO, in a conference call with analysts, would not be drawn on further asset sales.

“I am not going to comment on any further actions,” he said, “but I’ll just give you the high level perspective. IBM is the high-value company and how we remain high-value is through portfolio optimization.”

“We consistently look at our portfolio, and I think we stated this many times before, we look at many different factors from market attractiveness to our ability to win and differentiate to where client value and profit pools are shifting overtime to the value of our integrated model and how well that place together. And we will consistently do that to make sure that we are optimizing the right level of return for our investors, and we can win in the marketplace.”

Read this: IBM Launches “World Wire” for Blockchain-Based Payments

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