Dive Brief:
- IBM reported revenue fell 5.1% to $8.41 billion in the second quarter, according to Reuters. Analysts had expected about $8.58 billion, Reuters noted, citing analytics firm FactSet.
- Growth in IBM's "strategic imperatives" — which includes cloud, cybersecurity and data analytics — rose 5%. But those gains were lower than in previous quarters and offset by losses in IBM's software, hardware and consulting services areas.
- Chief Financial Officer Martin Schroeter told Reuters he predicts growth in the company's strategic imperatives would be back at 10% or higher by the end of the year.
Dive Insight:
IBM is now five years into its plan to reinvent itself, and it's struggling a bit. While new investments are building steam, legacy offerings are proving to be an anchor, leaving the company caught between the two. There are some positives, despite a drop in revenue for 20 consecutive quarters. The question is, are there enough?
Much is expected from the launch later this year of IBM Z, a mainframe that can run 12 billion encrypted transactions daily. Big Blue has high hopes for its cloud business, and it has had big wins lately, with Lloyd's of London, American Airlines and Bombardier recently signing on for its cloud services. The problem is, its cloud business is not enough to offset the pull down caused by the legacy businesses. And the company also recently lost one of its biggest cloud customers, WhatsApp, when Facebook moved the app in-house.
IBM's cloud service currently ranks fourth behind AWS, Microsoft and Google, according to Synergy Research. And while the company is staking a lot on cloud to carry it into the future, IDC recently estimated IBM will fall further behind Amazon and Microsoft by the end of this year.
