Sci-tech

Cloud marks bright spot amid IBM's revenue woes

Cloud marks bright spot amid IBM's revenue woes”

IBM shares fell more than 5% in after-hours trading Wednesday after the company reported a fifth straight quarter of falling sales despite the first contributions of its Red Hat acquisition. Analysts had forecast $18.2 billion.

Charles King of Pund-IT Inc. told SiliconANGLE that IBM's rough quarter was the result of a trio of issues: the weakness in its Global Technology Services unit, a continued divestiture of low-performing software assets and the poor performance of the Systems group. The company, alongside other industry players, has been on a downward trend for several months. The former climbed 8%, while the latter increased 2%.

Cloud & Cognitive Software (includes cloud and data platforms which includes Red Hat; cognitive applications; and transaction processing platforms) — revenues of $5.3 billion, up 6.4 percent (up 7.8 percent adjusting for currency), led by security, IoT, data and AI platforms and hybrid cloud; cloud and data platforms, up 17 percent (up 19 percent adjusting for currency); cognitive applications, up 4 percent (up 6 percent adjusting for currency); transaction processing platforms, down 5 percent (down 4 percent adjusting for currency).

According to IBM, year-to-date results reflect the impact of items related to the Red Hat acquisition. Excluding both, but including the partial Red Hat revenue, IBM's revenue would have declined by just 0.6% year over year. The segment reported revenues of Dollars 6.7 Billion, decreasing by 5.6% year-over-year. IBM began shipping the new z15 mainframe in the final week of the quarter, so mainframe sales should soar in the fourth quarter.

The systems segment was the company's weakest link last quarter as well, followed by global financing and global technology services.

Global financing revenues were $343m, down 11.7 per cent.

IBM President and CEO Virginia Rometty delivers a speech to participants during the 4th edition of the Viva Technology show at Parc des Expositions Porte de Versailles on May 16, 2019 in Paris, France.

The company reported net cash from operating activities of $3.6 billion for the third quarter.

"We generated $12.3 billion in free cash flow over the last 12 months and with our disciplined financial management, we reduced debt by almost $7 billion in the quarter, while maintaining a strong cash balance".

The acquisition was IBM's largest ever, and it's a bet by Chief Executive Officer Ginni Rometty (pictured) on the emerging hybrid and multicloud markets to drive new growth. "We generated $12.3 billion in free cash flow over the last 12 months and with our disciplined financial management we reduced debt by almost $7 billion in the quarter, while maintaining a strong cash balance".

As for guidance, IBM was forced to cut its full-year earnings estimate.



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