IBM Down On Q2 Revenue Miss


IBM's total second-quarter revenue came in at $19.3 billion, down 5 percent year over year without adjustments for currency fluctuations. This marks the 21th straight quarter the company has reported lower revenues.

IBM's new data centres will help continue this growth by giving customers in more regions better access to its cloud services.

"In fact, despite reported gains in these strategic portions of IBM's business, the vendor experienced year-to-year revenue declines across all five of its major business units", TBR research analyst, Stephanie Long, said.

Are we getting a sense here that IBM is intending to gradually move some of its customers' on-premises workloads, running on x86, Power and mainframes, to its Cloud data centres, offering hybrid on-premises and (its own) public cloud, so cutting out Amazon and Azure and Google's Cloud Platform?

Ginni Rometty, IBM chair, president and CEO, says: "In the second quarter, we strengthened our position as the enterprise cloud leader and added more of the world's leading companies to the IBM Cloud". And 30 percent of those next-generation technologies are delivered as a service, contributing to an $8.8 billion run rate in that category at the end of the quarter.

But the new businesses still aren't yet big enough to offset declines in its traditional businesses.

"The quarter played out as we expected with continued solid growth in our strategic imperatives which now really reflects organic growth", IBM CFO Martin Schroeter said on a conference call transcribed by Seeking Alpha. The technology giant has made $15.1 billion over the last 12 months from its cloud-computing segment, which it is now heavily invested in. IBM reiterated a forecast for this year of "at least" a $13.80-a-share profit for 2017 before certain costs, while analysts peg it at $13.68. The platform allows clients to integrate data from their existing system with other kinds of data in the cloud, and it uses Watson to make sense of all of it.

IBM stock was down 2.5 percent on Tuesday after the company disclosed earnings for the second quarter of the year, falling short of revenue estimates but beating earnings estimates. Revenue from security was also up four per cent.

IBM's stock is poised to fall 18 percent and the company's AI supercomputer, Watson, won't move the needle, Jefferies' James Kisner told CNBC on Wednesday. In May, she lost some support from one of IBM's most important backers, when Warren Buffett, chairman of Berkshire Hathaway Inc., who had been IBM's largest investor, revealed that he had sold about a third Berkshire's stake.