IBM once again underwhelmed its investors when it reported yesterday that second quarter revenue declined by 4.7%. It is the twenty-first consecutive quarter that IBM has posted a decline in sales. After getting close to reporting break-even sales results last year, the company’s revenue declines have once again steepened. At the same time, pre-tax margins that were once above 20% are now consistently in the 15% range.
More worrying to investors than the headline decline was where the declines came within IBM’s business mix. Despite revenue from the company’s “Strategic Imperatives” areas now comprising 43% of IBM’s total, the overall growth rate for the company continues to be pressured. Cloud growth was 15% compared to last year, but that rate indicates a deceleration from previous quarters and does not seem sufficient to pick up the slack of the company’s declining divisions – which have historically included servicing company’s IT departments in ways that the advent of cloud computing is making obsolete.
IBM’s CEO Gini Rometty continued to speak optimistically and pointed to innovation within cloud computing in particular.
Shares of IBM declined by more than 4% in trading today on the New York Stock Exchange after declining about 8% YTD before this quarter’s earnings release.
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