IBM shuffles units, axes staff, sees profit shrink

Big surprise. But the bright side? Analysts thought it was going to be worse

IBM's attempts to re-organize its businesses and focus on its Watson cloud-AI-offering-thing did not prevent Big Blue from tumbling to its sixteenth consecutive quarter of falling revenue.

The enterprise giant said on Monday that its new "reporting structures" will show how it is focusing on growth markets like cloud services and cognitive tools. In the Q1 2016 report [PDF], however, the numbers look awfully familiar:

  • Revenues for the quarter to March 31 were US$18.7bn, down five per cent from the same period last year.
  • Net income was $2.3bn, down about 21 per cent from Q1 last year.
  • Earnings per share of $2.35 came in above analyst expectations of $2.09.
  • Technology services and cloud revenues were $8.4bn, a 1.5 per cent decrease.
  • Cognitive solutions, the business unit that now includes Watson, saw revenues of $4bn, down 1.7 per cent, though IBM argues this figure is "flat" when adjusted for currency.
  • Global business services reported revenues of $4.1bn, a drop of 4.3 per cent from last year's quarter.
  • Systems revenues of $1.7bn were down 21.8 per cent.

CEO Ginni Rometty remained unfazed by yet another quarter of declining revenue, opting instead to highlight the areas in which IBM did manage to grow.

"We are pleased with the progress we have made helping our clients apply new cognitive solutions and hybrid cloud platforms," Rometty said.

"IBM has established itself as the industry leader in total cloud, analytics and cognitive, all of which helped drive our strategic imperatives revenue growth at a strong double-digit rate, substantially faster than the market."

This as IBM has been cutting jobs as part of its effort to restructure and cut costs. Among those, as many as 1,300 jobs will be lost in the UK. IBM reported just under $1.5bn in costs related to those moves last quarter.

"As we transform our business and move into new areas, we need to transform our workforce," said CFO Martin Schroeter. "Not only the types of skills, but how we operate."

IBM shares were down five per cent in after-hours trading. ®

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