IBM isn’t out of the woods yet in transforming itself — nearly all of its main business units are still shrinking in terms of revenue — but its last quarter did show some good progress in the new areas it is ramping up, known as its “strategic imperatives.”
These areas were up 30%, in constant currency (adjusted for unfavorable foreign exchange rates compared with last year), and 20% when including that stuff.
Its cloud delivered as a service is now big enough that IBM was happy to report revenues on it. IBM says that its cloud revenue was up over 75% in constant currency and excluding such revenue from the businesses it sold last year. And up more than 60% when including that stuff.
That means it’s on track to be a $US3.8 billion business this year, compared to being on track to be a $US2.3 billion business in the first quarter of 2014. That’s still far behind the 800-pound gorilla Amazon, who for the first time will report its cloud revenue during its earnings later this week. Analysts are expecting that figure to come in at $US6 to $US7 billion.
IBM has historically lumped a lot of other stuff into “cloud” when it reports that number, including “private cloud” — that’s when businesses still buy their own software and servers to run in their own data center, but with special software that lets them run more efficiently. Because that involves buying expensive equipment, lumping “private cloud” sales into an overall cloud business can vastly bump up the revenue figures.
IBM’s analytics revenue is up more than 20 per cent in constant currency, too, and up 12 per cent factoring that in.
Analytics is the hot thing these days because mobile devices, big data, and cloud computing have made it easier for any size company to capture data and analyse it.
But IBM has actually been a major player in the field for decades, so this isn’t so much a new thing for the company as a shift in emphasis. It’s a good sign to see sales growing in the area. That could indicate that it’s not losing share to newer players.
That said, IBM’s core businesses are still contracting and it will be a while before these new ones can replace the lost revenue. The company, while still highly profitable, isn’t out of the woods yet.
But the company insists that all is going in the right direction and it maintained its full-year EPS guidance (it doesn’t guide on revenue) of non-GAAP (operating) EPS of $US15.75 to $US16.50.
It looks like investors are starting to believe. The stock was up more than 3% during the day in anticipation of a good earnings report and has held the gains in after-hours trading.
IBM doesn’t chart the progress of its strategic initiatives but here’s the big picture look at its main business units.