IBM investors cheer signs of success for Big Blue’s strategy
new york — IBM has given its investors a sign that Big Blue may finally be turning things around.
Revenue increased for the first time in a key unit — cognitive solutions, including its Watson artificial intelligence platform — that the company has been touting as crucial to future growth. The results may signal that Chief Executive Officer Ginni Rometty is making good on her promise to shift IBM’s software and services offerings to match customers’ increasing appetite for cloudbased solutions. It’s been an uphill battle. Overall, sales have declined for 17 quarters in a row, while margins have also narrowed.
International Business Machines Corp’s results on Monday “underscore that the company is beginning to find an inflection point,” said Bill Kreher, an analyst with Edward Jones & Co. “We may begin to see the company grow as a whole as soon as next year.”
Second-quarter sales gained 3.5 per cent to $4.7 billion in the cognitive solutions group, including analytics and security software products.
This is the first time since Armonk, New York-based IBM reorganised its segments that cognitive solutions has registered a revenue increase, after declining the previous five quarters in a row. Chief Financial Officer Martin Schroeter highlighted Cognos and Watson products in the analytics portfolio as the major reasons for the increase.
Shares jumped in extended trading in New York, the first positive reaction to an earnings report in four quarters. The stock gained as much as 3.8 per cent after closing at $159.86.
To keep up the momentum, IBM will have to prove that it can meet expectations for its fullyear earnings forecast of at least $13.50 a share. This means that more than 60 per cent of its profit will have to come from the latter half of 2016.
In the first half of this year, IBM spent $5.4 billion on deals, closing 11 of them. Acquisitions added a two-percentage-point boost to revenue this quarter and is expected to add more to the top line during the second half of the year, Schroeter said on an earnings call late Monday. — Bloomberg