IBM Q1 earnings prove that turning a battleship around isn’t easy

19 Apr 20175 Shares

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Big Blue’s total revenue is down for 20th consecutive quarter, as transformation from hardware giant to software juggernaut continues slowly but steadily.

Tech colossus IBM’s Q1 revenues for 2017 fell short of expectations, with the company reporting a bigger-than-expected decline for the first time in five quarters.

IBM, known in the tech industry as Big Blue, reported a 13pc drop in quarterly earnings and narrower income across business sectors including Cloud and Watson, its AI business unit.

‘We are developing and bringing to market emerging technologies such as blockchain and quantum, revolutionising how enterprises will tackle complex business problems in the years ahead’
– GINNI ROMETTY

IBM claimed revenues of $18.2bn for the first quarter of 2017.

The company said that first-quarter earnings dipped because some large service contracts fell through.

It is the 20th consecutive quarterly decline for IBM and a reminder to investors that they will need to be patient while the company positions itself to capitalise on the big bets it is making on the future.

Big Blue’s big bets

Although the return to growth that CEO Ginni Rometty has promised investors is taking longer to materialise, the strategy appears to be working.

Revenues from ‘Strategic Imperatives’ during the quarter was $7.8bn, up 12pc on the previous year, while revenues from Cloud were $3.5bn, up 33pc year-on-year.

IBM said that mobile earnings increased 20pc and security earnings increased 9pc.

“We continued to make investments in the first quarter to expand our cognitive and cloud platform, and we increased our research and development spending,” said Martin Schroeter, IBM senior vice-president and chief financial officer.

“At the same time, we returned more than $2.6bn to shareholders through dividends and gross share repurchases.”

The fact that IBM is moving swiftly into areas such as AI and blockchain is indicative of the overall transformation of the company in the last decade.

It is clear that Rometty has achieved a feat by turning what was once the world’s biggest PC manufacturer into a pure-play software enterprise.

“In the first quarter, both the IBM Cloud and our cognitive solutions again grew strongly, which fuelled robust performance in our strategic imperatives,” said Ginni Rometty, IBM chair, president and chief executive officer.

“In addition, we are developing and bringing to market emerging technologies such as blockchain and quantum, revolutionising how enterprises will tackle complex business problems in the years ahead,” she added.

Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com