IBM revenue dropped 2 percent to $18.8 billion — hit by slowing software sales and wavering demand for mainframe servers, in the third quarter ended September.
IBM CEO Ginni Rometty’s decision to focus on faster-growing cloud and analytics services to lower dependence on traditional hardware products and reverse years of revenue declines did not work well this quarter as well.
The Armonk, New York-based company said cloud revenue was $19 billion (+20 percent) over last 12 months. As-a-service annual exit run rate for cloud revenue was $11.4 billion (+21 percent) in the quarter.
# $4.1 billion (–6 percent) from Cognitive Solutions
# $4.1 billion (+1 percent) from Global Business Services
# $8.3 billion (–2 percent) from Technology Services & Cloud Platforms
# $1.7 billion (+1 percent) from Systems
# $388 million (–9 percent) from Global Financing
IBM said revenue at its systems unit, which includes mainframe servers and data storage systems sold to large organizations, climbed only 1 percent, compared with a 25 percent jump in the previous quarter.
Sales growth of z14 mainframe servers, introduced about a year ago, slowed as customers await the launch of new machines before they upgrade.
IBM’s cognitive software business, which houses artificial intelligence platform Watson, analytics and cybersecurity services, had sales of $4.15 billion, down 6 percent from a year earlier.
Seasonal factors affecting demand for software such as transaction processing platforms hurt revenue, IBM Chief Financial Officer James Kavanaugh said in an interview, adding that there were signs demand was recovering.
IBM, which gets over 60 percent of its revenue from outside the United States, said a stronger dollar also weighed on results.
The company said it made $39.5 billion in revenue over the last 12 months from its “strategic imperatives” — high-growth businesses including cloud services that are spread across its divisions.
Net income fell to $2.69 billion, from $2.73 billion a year earlier, IBM said.