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IBM plays a confusing game to claim stronger cloud business

IBM Corp., as Oracle Corp., provides investors with confusing information about their cloud computing revenue and tries to show their business in the widest possible light.

The most confusing part of IBM's

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approach binds its cloud operations – an attempt to find revenue in new technology – to its main business, an old technology that was the main reason why IBM managed to take a long distance of reduced revenue last year. In the company's quarterly conference, Tuesday's Finance Director Jim Kavanaugh said the slower growth of 6% of his cloud business in the quarter ̵

1; a 13% decrease in Q3 – was due to the current slowdown cycle in the mainframe business. 19659002] There seemed to be a new wrinkle in how IBM reports its revenue and how it breaks down its cloud business. IBM provided charts in its presentation to follow its fourth quarterly earnings call, adding a new column on page 16 of a chart that breaks down the growth of its so-called strategic imperatives. The new column shows growth data for these imperatives, from analysis to cloud to security, "Excluding IBM Z yr / yr."

Learn more about IBM's Fourth Quarterly Profit

IBM is trying to show more growth for investors in its newer, emerging companies that it groups under moniker of strategic imperatives: clouds, analytics, mobile, social and security. In 2018, half of its total revenue of $ 79.6 billion came from strategic imperatives, amounting to $ 39.8 billion. An objective that investors hoped it would achieve, as opposed to more revenue from its older main work.

IBM Total Fourth Quarterly Revenue of $ 5.7 billion increased by 19%, with the exception of the company's mainframe business, IBM Z. If the main business deal includes, IBM's total cloud business includes 6%.

"When you look at the cloud in the quarter, the cloud number that actually written reflects the same basic headwind on the rap of the product cycle, the big main frame we must overcome," said Kavanaugh in response to a question on Tuesday's call

When asked about more information on how its cloud operations are linked to its main frame sales, IBM said its cloud operations are slightly different from other cloud companies because it has an established position on the company's data center market with its large installed base of mainframe customers. Customers may run a private cloud on their own premises, using IBM's main capabilities, or they can run on an IBM cloud from an IBM data center, which will also use some of their main capabilities.

"IBM has a lot of private cloud customers. And because of the service business, it will see more and more hybrid implementations customers want to run a hybrid environment," a spokesman said.

IBM includes hardware used to create private and hybrid cloud and its consulting and system integration work in its total revenue.

Analysts who were on the call – at least those who managed to pay attention after Kavanaugh blathered 43 minutes ahead with prepared remarks before Q&A – seemed to appreciate the new split. [19659002] "We would have preferred IBM's 4Q sales to come out of the strategic imperatives," wrote analyst Jeffrey Kvaal in a note to customers. "Everything can't be lost. IBM offered a new disclosure that revealed that the deceleration in the SI [Strategic Imperative] units originates from the completion of the z14 mainframe cycle. While only 10% of SI sales balanced the 40% plus reduction in the Z series, SI sales are quite significant. "

Forrester Research analyst Andrew Bartels believes, however, that counting services and system integration as part of the cloud is" bit of a stretch "The IBM definition of clouds is quite wide and very elastic," says Bartels, vice president and analyst at Forrester. An email.

"IBM wants to count on hardware to show the size of its cloud revenue, but does not want to count on hardware to show growth in cloud revenue," Bartels said. "So, out of their $ 5.7 billion in reported cloud revenue, I would expect only $ 3.1 billion to be really cloud, and most are private clouds. "

The total $ 3.1 billion of true cloud revenue in the fourth quarter comes from cognitive solutions where IBM reported 700 $ million in software revenue as a service and single applications where it competes with Salesforce.com

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Oracle Corp.

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and SAP AG

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