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Cloud and cognitive computing fails to save IBM from 19th quarter of declining revenue

New business models fail to offset the decline in revenue from traditional business areas.

By James Nunns

IBM yet again reported a quarter of declining revenue, making it the 19th consecutive quarter where the company has seen its revenue fall.

The company from Armonk, N.Y., reported that fourth quarter revenue fell 1% from the year-ago period to $21.8bn, however, positive news came in the form of its net profit growing by 1% to around $4.5bn.

Despite this, Big Blue still saw its profit fall 11% for the full year to $11.9bn. With Systems revenues, systems hardware and operating systems software, down 12.5% to $2.5bn.

While IBM continues to transform its company and has increasingly looked at new technology sectors such as cloud computing and the world of machine learning and cognitive computing, with its Watson offering, this has failed to offset the decline in its traditional big money business areas.

The company did show that annual revenue in its newer businesses rose by 14%, and that now makes up 41% of total sales. This puts IBM well ahead of track when it comes to its own forecasts. Big Blue

Big Blue had forecast that its nascent businesses would contribute 40% by 2018, so it’s at least ahead of schedule, although that hasn’t seen its revenue pick up.

Ginni Rometty, IBM chairman, president and chief executive officer, said: “In 2016, our strategic imperatives grew to represent more than 40 percent of our total revenue and we have established ourselves as the industry’s leading cognitive solutions and cloud platform company.

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“IBM Watson is the world’s leading AI platform for business, and emerging solutions such as IBM Blockchain are enabling new levels of trust in transactions of every kind.  More and more clients are choosing the IBM Cloud because of its differentiated capabilities, which are helping to transform industries, such as financial services, airlines and retail.”

To be fair, IBM is far from alone with struggling with a transition to cloud computing. A number of the older tech companies such as Oracle have struggled to match declining traditional technology sales with the new revenues from cloud technologies.

Cloud deals such as its recent $62m contract with the US will help to turn things around in the long run, but in the meantime there is plenty of short term (IBM will be hoping) pain to experience.

On the whole IBM reported that cloud revenue was up 35%, coming in at $13.7bn for the full year. With its other newer business segment, Cognitive Solutions, which includes solutions software and transaction processing software, rose by 1.4% to $5.3bn.

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