IBM Profit Helped by Cost Cutting, Revenue Still Soft
IBM on Thursday posted a net gain during the second quarter of 28%, partly from a charge of restructuring that held down results from the same period one year ago. Revenue was down by 2.2%.
The flagship business of mainframe-computers performed better than had been expected by analysts, but revenue in server systems maintained its slump, while services and software businesses did not show growth that had been projected by analysts.
Shares at IBM have increased by close to 3% since the start of 2014. After the earnings were released, shares of Big Blue dropped by close to 2%.
Like many makers of hardware, IBM struggled in its response to market shifts, including the increase in inexpensive commodity servers.
The majority of customers also started outsourcing operations to cloud services, which lowered spending on software and computers.
Virginia Rometty, the CEO at IBM ramped up investments of IBM in cloud computing as well as areas of analyst’s software.
To expand amongst corporate users of tablets and smartphones, Apple and IBM agreed on Tuesday to join forces to create business apps that are simple to follow and to sell iPads and iPhones to corporate customers of IBM.
On Thursday IBM highlighted its gains on some of the same areas including an increase of 50% in revenue from cloud computing. However, those businesses have not become large enough to offset its struggles in the legacy business of IBM.
IBM said services revenue, it largest sector was down 1%, though revenue was higher by 1%.
One analyst said that new signings of its services deal were down significantly and IBM had nine consecutive quarters with declines in revenue from services.
IBM also did not meet projections during the quarter for revenue from software, which was up just 1% while revenue from operating systems was off by 13%.
CFO Martin Schroeter remains positive over both services and software performing better during the second six months of 2014.