IBM Corporation

by Staff Reports • @IBMinsights

IBM’s commitment to data, cloud strong despite disappointing Q3 earnings

Published October 21, 2014


NEWS BRIEF--As IBM faces slumping revenues amid slowed customer spending, the company’s commitment to its cloud and data analytics service remains steadfast.

IBM’s third quarter financial results reflected underperforming software sales and lower productivity in services in the quarter. In addition, the Big Blue announced that it would not meet a five-year earnings goal of $20 per share next year.

IBM shares fell 7 percent on the announcement.

However, Ginni Rometty, IBM Chairman, President, and CEO, emphasized the company’s ongoing commitment to cloud and data analytics.

“We are disappointed in our performance,” Rometty says in a release. “We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry. While we did not produce the results we expected to achieve, we again performed well in our strategic growth areas—cloud, data and analytics, security, social, and mobile—where we continue to shift our business. We will accelerate this transformation.”

Net income for the quarter from continuing operations was $3.5 billion, down 17 percent from $4.1 billion in the third-quarter of 2013. The company’s third-quarter diluted earnings from continuing operations of $3.46 per share is down 8 percent from earnings of $3.77 per share in the third-quarter of 2013.

Revenue from IBM’s cloud service unit increased more than 50 percent in the quarter, as did mobile revenue.

“Make no mistakes, our results in this quarter were disappointing and we don’t want to minimize that,” Rometty says during a conference call. “But we have been very clear that this industry is shifting and we have been executing a strategy that moves this company to the future. We are reinventing and managing this company for the long term.

“We’ve got to reinvent ourselves like we’ve done in prior generations,” she adds.

Part of that transformation is IBM’s agreement with Globalfoundries, Inc., under which Globalfoundries will acquire IBM’s slumping semiconductor unit. As part of the agreement, announced Monday, IBM will pay Globalfoundries $1.5 billion to take over the unit.

According to a release, Globalfoundries, which has offices in Germany, Singapore, and the U.S., will gain intellectual property and technologies related to IBM microelectronics. Globalfoundries will become IBM’s exclusive server processor semiconductor technology provider for the next 10 years.

The divestiture enables IBM to focus on fundamental semiconductor research and the development of future cloud, mobile, big data, and analytics, and secure transaction-optimized systems, the company explains in a release announcing the agreement.



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