This technology company is facing mounting skepticism and ongoing drops in revenue, and MoneyShow's Jim Jubak, wonders if this new strategy is enough to overcome the obstacles still in its path.
Yesterday, January 21, International Business Machines (IBM) reported a seventh straight quarterly drop in revenue. Revenue fell 5.5% to $27.7 billion for the fourth quarter of 2013. That was below the $28.3 billion projected by analysts.
The company specific problem for IBM is that revenue for its older core hardware business is falling like a stone, while the company is still trying to build revenue for newer businesses, such as cloud services.
In the fourth quarter, for example, the systems and technology hardware division reported a 26% drop in revenue year over year. (Net income fell 79% from a year ago.) For the quarter, revenue in this division came to $4.3 billion.
It's no longer enough for IBM to target software and services, in general, to make up for the shortfall in hardware. IBM's software division didn't exactly tear up the track in the fourth quarter, with revenue climbing just 3% year over year. Technology services revenue fell 4% in the quarter, and business services revenue advanced just 1%.
So, where is growth supposed to come from for IBM? Cloud computing will play a central role, if I can judge from the deals IBM CEO Ginni Rometty has pursued since taking over as head of the company two years ago. Her biggest acquisition was the $2 billion purchase of cloud computing storage company SoftLayer Technologies in 2013. IBM has recently said it will invest $1.2 billion in its cloud services business in 2014. And this emphasis on the cloud ties in with the company's decision to build a new business unit around its Watson supercomputer. The idea is that a Watson supercomputer can analyze large volumes of data and let customers mine that data.
Finding growth in the cloud looks like a reasonable strategy. IBM's cloud revenue climbed 69% in 2013 to $4.4 billion.
But I think it does lead to two problems for investors in IBM.
Page 1 | Page 2 | Next Page
No comments:
Post a Comment