IBMs finanÂcials for the third quarÂter have failed to impress investors.
The third quarÂter finanÂcials announced by IBM this week highÂlightÂed the fact that the comÂpaÂny is havÂing real difÂfiÂculÂties with its hardÂware diviÂsion that has been adverseÂly affectÂed by the growÂing uptake of cloud serÂvices. Its own cloud serÂvices are steadiÂly comÂing on stream and should help grow that secÂtor in the comÂing months as more and more comÂpaÂnies rely on IBM for their ERP cloud resources.
OverÂall revÂenue for IBM dropped by $1bn, mainÂly accountÂed for by the aforeÂmenÂtioned drop in hardÂware sales that amountÂed to 17 perÂcent. OverÂall revÂenues for the first nine months of this year saw a fall of 4 perÂcent at $72.1bn. This comÂpared with revÂenue for the same periÂod last year of $75.2bn. IBMs softÂware diviÂsion also saw a disÂapÂpointÂing result over the last quarÂter with an increase in sales of only 1 percent.
The results were reflectÂed by the price of IBM stock, which finÂished at a two-year low point after the announceÂment. IBM has made some big promisÂes that investors now appear to be havÂing conÂcerns about. PerÂhaps the proÂjectÂed $7bn in cloud revÂenues every year by the year 2015, anticÂiÂpatÂing divÂiÂdends of $20 per share by that time, is being met with some skepÂtiÂcism by investors?
The company’s probÂlems seem to stem from the link between its hardÂware and the relÂaÂtiveÂly new world of the cloud. If unable to sevÂer this link it is thought that the probÂlems for IBM will grow rather than decrease. It will be difÂfiÂcult to offer comÂpaÂnies self-serÂvice and on-demand serÂvices while the hardÂware sitÂuÂaÂtion is still in the backÂground. With IBM techÂnolÂoÂgy it is difÂfiÂcult for a busiÂness to run cloud serÂvices for itself. It is now an attracÂtive propoÂsiÂtion to do this as a comÂpaÂny with a disÂtribÂuted subÂstrucÂture can avoid the costs of expenÂsive IT support.
IBM is of course still expeÂriÂencÂing demand from comÂpaÂnies to proÂvide their infraÂstrucÂture along with the othÂer big playÂers in the marÂket place, such as Dell, HP and CisÂco. It is in comÂbinÂing that infraÂstrucÂture with the cloud that the probÂlems seem to be arising.
There is litÂtle doubt that IBM will overÂcome its probÂlems. Whether that will be in the short term or over a long haul remains to be seen.