Big Blue's blues diffuse: IBM's sales drain now more like a sad trickle

Biz optimistic 2017 will see cloud and mobile help boost bottom line

IBM is touting growth in its cloud and cognitive business units as the enterprise giant wraps up a year of double-digit revenue declines.

Big Blue said that for its fourth quarter of 2016, ended December 31, revenues were nearly flat over the same period last year and net income was up slightly.

• Revenues of $21.8bn were down 1 per cent from Q4 2015.
• Net income of $4.5bn was up 1 per cent from last year's quarter.
• Technology Services and Cloud segment revenues were $9.3bn, an increase of 1.7 per cent. The cloud business itself had revenues of $4.2bn, up 33 per cent.
• Cognitive Solutions (including the Watson business) pulled revenues of $5.3bn, up 1.4 per cent.
• Global Business Services segment revenue was $4.1bn, down 4.1 per cent.
• Systems revenues of $2.5bn were down 12.5 per cent as IBM's hardware business continued to struggle.
• Non-GAAP earnings per share were $5.01, topping estimates of $4.88.

For the full fiscal year 2016:

• Revenues were $79.9bn, down 2 per cent from 2015.
• Net income was $11.9bn, down 11 per cent from the year-ago quarter.
• Big Blue's "Strategic Imperatives" group, a category that includes cloud, mobile, analytics, security, and social, combined for revenues of $32.8bn, up 13 per cent.
• Cloud revenues alone were $13.7bn for the year, an increase of 35 per cent.

The numbers come as IBM is wrapping up a wave of layoffs that saw tens of thousands of jobs cut, though IBM has been looking to fill some positions in its growing segments.

The hope is that in 2017 IBM will be able to turn the corner with its cloud and strategic imperatives and have those fast-growing segments make up the majority of revenues and help push IBM back into growth.

"In 2016, our strategic imperatives grew to represent more than 40 per cent of our total revenue and we have established ourselves as the industry's leading cognitive solutions and cloud platform company," said chairman and CEO Ginni Rometty.

IBM shares were down 2.37 per cent at $162.85 in after-hours trading.

"We believe that IBM is being challenged by three distinct structural forces affecting the business," said Bernstein analyst Toni Sacconaghi.

"The three key headwinds IBM faces are, one, a migration to off-premises and as-a-service offerings; two, the downstream impact from weak UNIX sales; and, three, maturity in the traditional outsourcing business.

"Its high-growth 'strategic imperatives' are largely replacing revenue deterioration from IBM's core businesses." ®