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April 19, 2016updated 05 Sep 2016 11:09am

Cloud and data analytics fail to rescue IBM from sixteenth quarter of declining revenue

News: Q1 2016 financial results for Big Blue show it is continuing to struggle with new product growth.

By James Nunns

IBM’s struggle to re-organise its businesses has continued with its latest financial results, which see the company’s revenue fall for the sixteenth consecutive quarter.

Net income for Q1 2016 fell 21% on a year-on-year basis to $2.3bn, while revenue for the quarter stood at $18.7bn, down 5% from the same period last year.

The results continue to make poor reading for Big Blue, but there have been some positives that highlight that the shifting focus to cloud and analytics is starting to gain traction.

The Q1 2016 results came under new reporting structures that aim to highlight how its transition is working.

Revenue in cognitive solutions, which is a combination of older and newer software such as the Watson data analytics units, declined 1.7% to $3.98 in Q1 2016. Technology Services and Cloud Platforms fell from $8.55bn in Q1 2015 to $8.42bn in the same period.

The company said that for the technology services and cloud platforms segment, the strategic imperatives revenue was up 45%, driven by cloud revenue which was up 50%.

Chief Financial Officer Martin Schroeter, IBM, said: "Our view on cloud is that enterprises see the most value in hybrid cloud solutions that enable new business models while leveraging existing systems and data. We brought Global Technology Services closer together with IBM’s cloud infrastructure and platform capabilities, to better position us to deliver these solutions to our clients."

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Revenue also declined in the Global Business Services division from $4.31bn in Q1 2015 to $4.13 in Q1 2016. This is an area which the company has been particularly active in strengthening in recent months.

At the end of March IBM bought Bluewolf, a consultancy partner signed to Salesforce for a reported but unconfirmed $200m, despite continued investment in this area the company experienced a 4.3% drop in revenue.

Despite these falling or stagnating numbers, Ginni Rometty, CEO, IBM, was positive about some areas.

Rometty said: "We are pleased with the progress we have made helping our clients apply new cognitive solutions and hybrid cloud platforms."

"IBM has established itself as the industry leader in total cloud, analytics and cognitive, all of which helped drive our strategic imperatives revenue growth at a strong double-digit rate, substantially faster than the market."

The systems unit of IBM was another area to experience falling numbers, falling from $2.14bn to $1.67bn year-over-year. This unit which houses hardware and operating system software, fell 22% but it is the only division where gross margin improved in the three months ended March. This is because there were fewer hardware sales.

IBM’s continued difficulties have seen the company cutting its workforce in the UK with 185 jobs in its Global Technology Services division axed in February. Financial analyst firm Bernstein estimated that at least 14,000 workers will be affected by IBM’s Q1 job cuts.

It is uncertain how many jobs will be cut but as IBM continues its transformation but it is looking as though the move to cloud and analytics will be a lengthy process.

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