The first quarter of the Big Blue couldn't generate impressive results for the company
International Business Machines Corporation has posted its 16th consecutive revenue decline. The world’s largest technology services company posted the first quarter revenue of $18.68 billion that, in comparison with last year’s same quarter, has fallen down by 4.6%. Consequently, the company’s profits fell down by 13.5%. However, the tech giant did manage to post the results slightly better than the analysts’ expectations of $18.29 billion. Also, the company earned EPS of $2.35 –slightly outperforming the analyst expectations of $2.09.
The current revenue is the worst to be reported by the company in almost fourteen years. The company’s transitioning from the traditional business of hardware computing to cloud and mobile computing couldn’t offset the bad revenue the tech giant garnered.
Under the leadership of Virginia Rometty, the company has been struggling for a turnaround for over four years now. The CEO has taken the business into the space of “cognitive solutions” which includes, cloud-based services, data analytics, and security software. Also called “strategic imperatives,” in the first quarter, the division’s profit went up by 14% however it still couldn’t balance the declines the company faces in the traditional business segment. In segregated view, the revenue from hardware and services segments fell down by 21.8% and 4.3% respectively.
Back in February, in a meeting with Wall Street analysts, the CEO had said that the company is transitioning to cloud platform and cognitive solutions company. Last year, Big Blue spent slightly above $9 billion on acquisitions and bought close to 20 companies. However, the transformation has been tougher than the anticipation of the company. The key problem is that the company’s traditional businesses are narrowing down at an alarmingly fast pace while the newer business of cloud computing has been growing with a snail’s pace.
Moreover, Big Blue’s revenue from cognitive computing group also came to $4 billion by declining 1.7% year over year. The figure has also taken into account the “traditional transaction processing services” which were used by the airline reservation systems and banks which also declined by around 5%.
The North Castle, New York firm’s revenue generated from cloud computing services was quite better. Over a year, the revenue of the particular segment went up by 34% –including the sales of SoftLayer and Bluemix cloud services. The revenue also accumulated the hardware sold to the customers who intend to build in-house cloud computing services.
Ahead of Monday’s earnings, an analyst from Sanford C. Bernstein & Co., Toni Sacconaghi said: “If the strategic imperatives are really working, then the company’s growth rate should be improving. The evidence so far has suggested that has not happened.”
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