IBM has "long way to go" to halt revenue decline

IBM is falling behind its competitors in its traditionally strong areas of software and hardware, with growth in its analytics, cloud, mobilility, security and social divisions failing to stop revenue decline.

The company's end-of-year results for 2015 show that total earnings were down 12 per cent year-on-year, with the biggest losses in software, followed by an 11 per cent decline in software and seven per cent fall in services revenues. Hardware was not such a big blow for the company, with revenues down one per cent for the last quarter of 2015 to $2.4bn (1.69bn).

IBM's strategic imperatives division, comprising cloud, analytics and engagement, made for much more pleasing reading, increasing 10 per cent year-on-year, or 16 per cent when you take into account currency shifts.

Cloud revenues showed the most promising levels of growth, increasing 43 per cent to $10.2bn (7.2bn), with cloud delivered as a service solutions raking in the most cash for the company.

The reason its strategic growth areas were so successful was because of a number of acquisitions to strengthen its hold on cloud-based solutions, such as Meteorix, AlchemyAPI, Cleversafe and SoftLayer, which have all helped build its portfolio of clients and grow revenues.

"We continue to make significant progress in our transformation to higher value. In 2015, our strategic imperatives of cloud, analytics, mobile, social and security grew 26 percent to $29 billion and now represent 35 percent of our total revenue," said Ginni Rometty, IBM chairman, president and chief executive officer.

"We strengthened our existing portfolio while investing aggressively in new opportunities like Watson Health, Watson Internet of Things and hybrid cloud. As we transform to a cognitive solutions and cloud platform company, we are well positioned to continue delivering greater value to our clients and returning capital to our shareholders," Rometty added.

Nevertheless, analysts have been left unimpressed.

Peter Roe of TechMarketView said: "Guidance for 2016 does not inspire confidence, with an annual eps (earnings per share) figure of US$13.50 being well below earlier expectations. GTS (Global Technology Services) looks as if it will lead better performance as cloud volumes grow, particularly via Softlayer, but the outlook for margins is unlikely to be very positive.

"Despite the growth in its strategic initiatives, the IBM reality is revealed in the cautious revenue and earnings guidance. The company is certainly making progress, but there is still a long way to go."