IBM Expects $40 Billion in Sales from Analytics, Cloud, Mobile, Security by 2018

IBM hopes to turn $4 billion in spending into some $40 billion in analytics, cloud, mobile and security sales, or 44 percent of 2018’s $90 billion in expected revenue.

DH Kass, Senior Contributing Blogger

March 2, 2015

3 Min Read
IBM Expects $40 Billion in Sales from Analytics, Cloud, Mobile, Security by 2018

In the next three years, IBM (IBM) hopes to turn $4 billion in spending on its “strategic imperatives,” namely analytics, cloud, mobile and security, into some $40 billion in sales, or 44 percent of 2018’s $90 billion in expected revenue, according to chief executive Ginni Rometty.

The company, beset by nearly three years of eroding sales, told investors at its annual meeting in New York late last week that it will concentrate on high-margin business as it transitions away from its traditional hardware portfolio. Five years ago, IBM’s analytics, cloud and mobile businesses together amounted to about 13 percent of the vendor’s sales, a percentage that more than doubled at the start of this year to some 27 percent of its sales, Rometty said.

That uptick in analytics, cloud and mobile occurred as IBM’s overall sales slid 7 percent in 2014 to $93 billion, a figure attributable to declines in hardware sales and sell-offs of its x86 server business to Lenovo and its semiconductor business to GlobalFoundaries.

“Much of the decline in revenue has been engineered by us,” Rometty said, as Re/code recounted. “We restructured the hardware business and it is now less than 10 percent of the company, and we returned that business to profitability.”

As Reuters reported, at the investors’ meeting IBM reiterated its forecast of $15.75 to $16.50 in operating earnings per share for 2015, and again cautioning that the strong U.S. dollar would negatively impact sales by about 6 percent this year.

Viewed through the rosiest of glasses, IBM’s case that it’s transitioning from a legacy hardware and software provider to a newly-invented supplier of cloud services, business analytics, mobile solutions and security platforms, holds water.

But the vendor’s streak of 11 consecutive quarterly revenue declines keep saying otherwise–not that the transition isn’t in play but that it’s taking precious time growing roots that could dent its effectiveness.

In its recently concluded Q4 2014, IBM posted a 12 percent shortfall in revenue compared to the same period last year to $24.1 billion, well short of analysts’ estimates of $24.8 billion. Per share earnings for the quarter fell 4 percent from last year to $5.54 a share while net income from continuing operations came in at $5.5 billion, an 11 percent slide from the year earlier period.

For the full year, IBM’s net income slid 7 percent to $15.8 billion and sales fell 6 percent to $92.8 billion. But in data that IBM argues reflects its transition, the vendor grew its cloud revenue by 60 percent to $7 billion, with cloud services accounting for $3 billion, a 75 percent uptick; business analytics showing a 7 percent climb to about $17 billion, with mobile revenue tripling and security sales jumping up some 19 percent.

Those figures prompted Rometty to claim IBM is “making significant progress in our transformation, continuing to shift IBM’s business to higher value, and investing and positioning ourselves for the longer term.”

In addition to focusing on its strategic imperatives, IBM has said it will pursue more partnerships in 2015 similar to last year’s enterprise mobility deal with Apple (AAPL) and a business analytics agreement with Twitter (TWTR).

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About the Author(s)

DH Kass

Senior Contributing Blogger, The VAR Guy

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