IBM promise in the cloud threatens to become false dawn

IBM has reported a mixed bag of results for the first quarter of 2017, with the strategic imperatives offerings up but overall revenues down 2% to $18.2 billion.

While another quarter of decline is nothing new to report for Big Blue, what might be worrying for the team is the trajectory of the business units. It would appear the legacy business is dropping quicker than expected, while the strategic imperatives side of things is not growing as quickly as hoped. IBM execs have certainly done a good job of digging the monster out of a deep hole, but more work needs to be done to ensure the last 12 months aren’t a false dawn.

“In the first quarter, we continued to deliver strong performance in our strategic imperative with revenue up 13% at constant currency,” said CFO Martin Schroeter. “Our Cloud offerings were up 35% this quarter; led by cloud as a service, which was up over 60%; Analytic, the largest of our strategic areas, was up 7%; Mobile was up over 20%; and Security up 10%.

“At our investor briefing last month, we spent the day showing how we’ve transformed IBM into a cognitive solutions and cloud platform Company, and the importance and value of delivering industry specific solution.”

These numbers might be all well and good, however the technology services and cloud platforms business dropped 2.5% to $8.2 billion. This area accounts for roughly 45% of total revenue.

The legacy unit is certainly a declining market, but it is still the core business of Big Blue. IBM has reinvented itself as a major player in the cloud market, though current revenues in the new world are unlikely to keep blood-thirsty investors at bay indefinitely. The mood in the investors camp might become quite sour quite quickly, as while a decline in the legacy business was expected, the fact the strategic imperatives side of things didn’t compensate will not go down well.

Progress is being made, but whether it is being made quick enough is sceptical territory for the moment.