IBMs financials for the third quarter have failed to impress investors.
The third quarter financials announced by IBM this week highlighted the fact that the company is having real difficulties with its hardware division that has been adversely affected by the growing uptake of cloud services. Its own cloud services are steadily coming on stream and should help grow that sector in the coming months as more and more companies rely on IBM for their ERP cloud resources.
Overall revenue for IBM dropped by $1bn, mainly accounted for by the aforementioned drop in hardware sales that amounted to 17 percent. Overall revenues for the first nine months of this year saw a fall of 4 percent at $72.1bn. This compared with revenue for the same period last year of $75.2bn. IBMs software division also saw a disappointing result over the last quarter with an increase in sales of only 1 percent.
The results were reflected by the price of IBM stock, which finished at a two-year low point after the announcement. IBM has made some big promises that investors now appear to be having concerns about. Perhaps the projected $7bn in cloud revenues every year by the year 2015, anticipating dividends of $20 per share by that time, is being met with some skepticism by investors?
The company’s problems seem to stem from the link between its hardware and the relatively new world of the cloud. If unable to sever this link it is thought that the problems for IBM will grow rather than decrease. It will be difficult to offer companies self-service and on-demand services while the hardware situation is still in the background. With IBM technology it is difficult for a business to run cloud services for itself. It is now an attractive proposition to do this as a company with a distributed substructure can avoid the costs of expensive IT support.
IBM is of course still experiencing demand from companies to provide their infrastructure along with the other big players in the market place, such as Dell, HP and Cisco. It is in combining that infrastructure with the cloud that the problems seem to be arising.
There is little doubt that IBM will overcome its problems. Whether that will be in the short term or over a long haul remains to be seen.