IBM profit tops estimate; focus turns to Red Hat
International Business Machines reported earnings that topped analysts’ estimates in the fiscal second quarter as investors look to the Red Hat acquisition to fuel future growth in cloud computing.
Earnings excluding some costs were $3.17 a share in the three months ending June 30, higher than the $3.08 average Wall Street estimate. For the full fiscal year, IBM stuck to a forecast of at least $13.90 a share. The shares jumped 2.7 percent in extended trading.
Analysts and investors will be tuning in to the conference call hoping to glean any details on the impact of IBM’s $34 billion acquisition of opensource software provider Red Hat. After lagging in the cloud market for more than a decade, IBM is pegging its future to a hybrid cloud strategy, that will allow it to offer services on both private and rival public clouds.
Chief Executive Officer Ginni Rometty paid a rich premium for Red Hat in order to help the 108-yearold company catch up with market leaders Amazon. com and Microsoft. The deal officially closed last week, so Red Hat’s contribution hasn’t shown up in IBM’s balance sheet yet. IBM said it will share further details at its annual investor briefing in early August.
Rometty has touted the Red Hat deal, which was announced in October, as a “game changer” for IBM, claiming it will reset the entire cloud landscape. IBM has estimated only 20 percent of enterprise applications have made the shift to cloud so far and Rometty believes the company is in prime position to conquer the remaining market.
By 2022, research firm Gartner predicts that about 75% of all databases will be migrated to a cloud platform.