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April 19, 2017

Where’s the silver lining for IBM? Cloud & Watson fail to fend off dwindling revenue

Watson & cloud revenues go up but it's not enough to keep IBM from hitting a 20th consecutive quarter of revenue decline.

By James Nunns

There’s more bad news for IBM as it marked another quarter of declining revenue.

The drop in revenue to $18.2bn, down from $18.7bn for the same period a year ago, means that Big Blue has now seen a decline for 20 consecutive quarters.

Other figures from its Q1 2017 financial results showed that net income fell 13% to $1.8bn and its various business units also failed to impress.

Systems revenue fell 16.8% to $1.4bn, global business services were down 3% to $4bn, global financing revenues fell 1.2% to $401m, and technical services and cloud revenues dropped 2.5% to $8.2bn.

The only silver lining being that its Cognitive solutions unit, which includes IBM Watson, posted a 2.1% rise to $4.1bn.

The big problem for IBM is that it is relying upon its Strategic imperatives revenue to become its core business and make up for the declines in its traditional business areas.

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Strategic imperatives, which includes things like cloud, analytics, mobile and social businesses, now accounts for 42% of its revenue at $33.6bn over the last 12 months, with cloud revenue standing at $14.6bn over the last 12 months. Cloud-as-a-Service annual exit run rate stood at $8.6bn in the quarter, up 59% year to year.  First quarter cloud revenues increased 33% to $3.5bn, while mobile increased 20% and security revenues increased 9%.

So it’s relatively good news on the cloud and analytics front but that hasn’t made up enough ground to counter the money-losing business areas.

Ginni Rometty, IBM chairman, president and CEO said: “In the first quarter, both the IBM Cloud and our cognitive solutions again grew strongly, which fueled robust performance in our strategic imperatives.

“In addition, we are developing and bringing to market emerging technologies such as blockchain and quantum, revolutionizing how enterprises will tackle complex business problems in the years ahead.”

IBM’s certainly been pushing its Watson and cloud capabilities extremely hard over the past couple of years, typically making a number of announcements regarding both each month.

The latest of these comes in the shape of new cognitive capabilities for IBM Watson Marketing Insights. The cloud-based service includes audience insights that reveal key predictors in customer data based on their interactions with the brand across channels such as email, digital, social media and in-store.

Read more: Bank of the future – How AI, big data and fintechs could save the big banks

Big Blue has also revealed new cloud-based weather monitoring capabilities that it says can pinpoint and proactively respond to weather events by automatically alerting clients to worsening conditions in locations of interest.

The company’s Resiliency Communications as a Service works by using mobile devices and web interfaces to automate workflows in order to analyse and identify the location of crisis events and responders, this then compiles response reports and helps to get the right people involved in order to react to situations.

Laurence Guihard-Joly, General Manager, IBM Global Resiliency Services. “These new enhancements from The Weather Company will advance our efforts to bring further preventive and cognitive value to our software defined resiliency solutions, and empower our clients and customers to maintain ‘always-on’expectations.”

Despite the declining revenue, IBM will be hoping that innovations in these fields, along with those in the areas of blockchain, will in the long run help it to turn its business around.

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