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Bloomberg
International Business Machines Corp. (IBM) reported a decline in revenue from the cloud-computing, artificial intelligence and cognitive software unit that the company is hanging its future on.
IBM reported a 2 percent drop, to $5.0 billion, in sales from cloud and cognitive software, in the three months ended March 31. Cloud revenue alone grew 10 percent over the last 12 months, but that was a slower pace than the previous quarter. Revenue across all of IBM’s business units either fell or was little changed, according to a company statement. The shares fell about 4 percent in extended trading.
Chief Financial Officer Jim Kavanaugh pegged the decline in cloud growth to a depreciation in the US dollar.
Excluding the currency headwind, cloud revenue grew 12 percent in the quarter, to $4.5 billion, double the pace from the previous period, Kavanaugh said in an interview.
IBM spent $33 billion last October to buy Red Hat, a move aimed at helping catapult the company into the ranks of the top cloud software providers. It was the biggest deal in IBM’s 108-year history and the world’s second-largest technology takeover ever. The transaction is expected to close later this year, but investors were looking for signs that it’s already beginning to pay off and help revive IBM’s trajectory.
“The stock market cares about the core business and what Red Hat is going to do to change the story,†Stifel analyst David Grossman said in an interview.
IBM has lagged the overall technology sector for years, with its 1 percent revenue growth in 2018 breaking a six-year run of declining sales. Analysts expect the slight reprieve to be short-lived, with annual revenue estimated to decline to $77.8 billion by the end of the year — the lowest since the late 1990s.