In amongst what was the usual mixed bag, IBM highlighted declines in the UK and Germany as causing a drag on growth in EMEA. The company pointed to “macro and geo-political trends” in particular, a situation that looks set to deepen following yesterday’s General Election announcement.
Overall, IBM saw its topline drop again, with revenue down 2% to $18.2bn (FY16 also saw a 2% decline). In the GBS business, revenue declined 2% with “modest growth in signings …. driven by our digital offerings”. Technology Services and Cloud Platforms was also down 2%, despite cloud growth of 40%. Consequently, IBM shares dropped c5% in afterhours trading.
If we look at the work IBM is doing to become a “Cognitive Solutions & Cloud Platform Company” it is making the right moves. Investments in areas such as Watson IoT, cloud and analytics, are matched with interesting partnerships (e.g. Visa where Watson IoT turns connected devices into potential points of sale). And while growth rates in some of its strategically important areas are well into double digits, the size of the revenue pot versus those traditional areas we quote above just isn’t big enough to counter the declines.
The added challenge for IBM and its global system integrator peers in traditional markets is that the pressure on pricing shows absolutely no sign of letting up. Customers are desperate to drive out costs and they want quick and substantial returns. Sometimes that means a significant move to as-a-service, but not always. These are testing times and if IBM shareholders think things will change substantially in the near term, they are likely to be disappointed.
Posted by Kate Hanaghan at '09:47'
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