By Steve Lohr
For 5 1/2 years, nearly the entire tenure of its chief executive, Virginia M. Rometty, IBM has reported a steady erosion of revenue.
Selling off its chip manufacturing and smaller data-center computer businesses contributed to the decline. So, too, did the fact that new businesses like cloud computing, data analytics and artificial intelligence had not yet grown big enough to make up for the downturn in IBM’s traditional hardware and software products.
But IBM’s half-decade losing streak will most likely end Thursday, analysts predict, when the company reports its quarterly performance.
The crossover to growth would be a long-awaited bright spot for Rometty and IBM, a challenged giant that has been overshadowed in recent years by the younger technology giants on the West Coast.
Even if IBM delivers a revenue gain, however, the bigger question facing the company remains: Has Rometty turned it around?
Skeptics abound. IBM is expected to have gotten an extra lift in the most recent quarter from currency gains and strong sales of a new line of mainframe computers. Without that help, the company’s revenue would decline by 2 percent or so, according to an estimate from A.M. Sacconaghi, a financial analyst for Sanford C. Bernstein.
There is no doubt, though, that there are signs of progress at IBM, which would not comment on its financial picture before the release of the earning report. So much attention is focused on the company’s top line because revenue is the broadest measure of the headway IBM is making in a difficult transformation toward cloud computing, data handling and AI offerings for corporate customers.
The new businesses — “strategic imperatives,” IBM calls them — now account for 45 percent of the company’s revenue. And though it still has a ways to go, IBM has steadily built up those operations — and gained converts.
The number of software developers using its cloud technology has doubled in the last year, IBM says, though it would not provide numbers. On Wednesday, Barclays upgraded IBM’s stock to a buy and noted its long-term opportunity in the cloud market. IBM’s stock price, a notable laggard as markets have surged in recent years, has climbed nearly 10 percent so far this year.
Today, IBM trails well behind Amazon Web Services and Microsoft in the cloud market, according to analysts. Yet IBM has invested heavily in more than 60 cloud data centers in 19 countries in the past three years. And the most recent analysis by IDC, a technology research firm, and a report last month by Jefferies, a Wall Street firm, ranked IBM third in the category, ahead of Google.
Companies want to move quickly, Kenny said, but they often want to exploit the speed and flexibility of cloud technology from within their own computer centers, where they figure their vital business data is more secure.
Most of this business software uses cloud technology that runs inside AT&T data centers — in a so-called private cloud, in contrast to a public cloud in which computing services are delivered from remote data centers owned by another company. Many corporations opt for private clouds to house their most sensitive customer and business data.
IBM emphasizes its hybrid stance in the cloud market, offering both private and public cloud technology to its corporate clients. In its financial reporting, IBM also includes all the hardware, software and services it sells to companies to build private clouds in its total cloud revenue, which would put it on a par with Amazon.
The startup’s clients include Unilever, Abbott Laboratories and The Economist. Today, Opentopic does all its software development on the IBM cloud, but that will most likely change soon.
His comment points to a brewing issue for IBM — and perhaps one that will help determine the resilience of Rometty’s turnaround campaign.
“If IBM does that,” said Frank Gens, IDC’s chief analyst, “its chance of being a cloud leader goes way up.”
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