IBM has ended one of the longest losing streaks in the technology world with it latest earnings, and it did it in style, exceeding analyst revenue expectations by almost $500 million.
The fall from grace was very well documented, but just like Microsoft and Netflix, IBM has now proven that giants can make a big change in strategic direction and maintain lofty positions at the top of the ranking tables. Perhaps there will be a few other of the big boys who will be looking over, trying to pick out a few tips on how to survive the transition to the digital economy.
“Our strategic imperatives revenue again grew at double digit rate and now represents 46% of total revenues,” said CEO Gini Rometty. “During 2017, we strengthened our position as the leading enterprise cloud provider and established IBM as the blockchain leader for business. Looking ahead we are uniquely positioned to help clients use data and AI to build smarter businesses.”
Now down to the numbers. Revenue was up 3.5% to $22.54 billion, beating analyst expectations by roughly $500 million. When adjusted for currency, this percentage actually drops to 1%, but this is still in the positive. Net income was a big negative, but this is solely down to a one-off charge as IBM takes advantage of the opportunity to repatriate profits.
It is a passing of the torch which we have been looking out for quite a while, but the Strategic Imperatives business unit is now making a stronger positive impact than the negative one felt by the declining legacy business. Strategic imperatives revenues accounted for $11.1 billion, a 17% increase year-on-year.
The share price did initially have a bit of a wobble after some concerns over the long-term success of the business, but that seems to be rectified. Initial concerns were the Watson AI solution, the poster boy of IBMs recovery, demonstrated relatively flat year-on-year sales, but confidence from some heavy hitting financial players seemed to have removed any doubt. Barclays and a few others upgraded the IBM stock since the results, indicating the worst might be over for Big Blue.
The cloud is the area which is proving to be the ultimate success story here, and while IBM might not be hitting with the heavy weights of the subsector, this successful quarter shows there is plenty of business to go around. AWS and Microsoft Azure are easily the top two players, having fractured off the challenge from Google in recent months.
That said, considering the gluttony of business there is out there in the big bad digital world of businesses scaling up online, the chasing pack of cloud wannabees could still turn a tidy profit. We’re pretty sure IBM won’t be too happy about lagging behind the leaders, but it still isn’t a terrible position to be in.