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What's dying on the vine and rhymes with IBM?

Unlucky Big Blue suffers 13th straight quarter of decline

It was business as usual for IBM in the second quarter of its fiscal 2015 – which in Big Blue's case means it once again posted revenues that were lower than the same period a year ago.

It was the thirteenth quarter in a row of which that could be said.

Of course, to hear CEO Ginny Rometti tell it, it's still all part and parcel of her ongoing turnaround plan, which she maintains will see IBM exit 2015 a more valuable business than when the year began.

"Our results for the first half of 2015 demonstrate that we continue to transform our business to higher value and return value to shareholders. We expanded margins, continued to innovate across our portfolio and delivered strong growth in our strategic imperatives of cloud, analytics and engagement, which are becoming a significant part of our business," Rometty said in a canned statement [PDF].

While all that may be true, however, one thing Big Blue didn't manage to do is boost its sales or profits.

It earned $3.84 per diluted share for the three months ending on June 30, which was rather better than the analysts expected. But it was a pyrrhic victory, as IBM's quarterly net income of $3.45bn was 16.3 per cent lower than in the year-ago period.

The revenue picture wasn't as bad as that – not quite. Sales dipped 13.4 per cent, resulting in total quarterly revenue of $20.81bn. But that missed analysts' estimates, and as with the previous sequential quarter, sales were down across every reporting segment, with no part of IBM's business spared.

Once again, the Systems Hardware division saw the steepest decline at 31.7 per cent, with total revenue of $2.06bn. Recall, though, that this time last year IBM was still selling x86-based System x servers, but it sold off that division to Lenovo in January.

Still, system Storage revenue was down 10 per cent, continuing the trend. And this time around, even mainframe sales seemed lackluster. Revenue from System z was up an astounding 118 per cent annually in the first quarter, but it only grew by 9 per cent in Q2.

The Software segment, likewise, was down 10.1 per cent from last year's quarter. Every major category of IBM software was either down or flat. Operating systems revenue, in particular, was down 17 per cent, at just $400m.

And Global Services, the divisions that saved IBM's bacon the last time it needed a major turnaround and which still contribute around 60 per cent of its total revenue, are also in the doldrums. Combined, Global Business Services and Global Technology Services brought in $12.4b in Q1, which was down 11 per cent annually. Global Business Services fared worse of the two, down 12 per cent.

Predictably, an unlucky thirteenth quarter of year-on-year decline did little to appease shareholders who are getting understandably dissatisfied with the trend, and IBM's stock price shrank more than 5 per cent in after-hours trading on the news. ®

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