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Cloud Stocks: IBM Banks on AI

Posted on Friday, Oct 18th 2019

Earlier this week, IBM (Nasdaq: IBM) declared its third quarter results that exceeded earnings expectations despite missing revenue estimates. The stock fell nearly 5% post the result announcement in the after-hours session.

IBM’s Financials
Revenues for the third quarter fell 3.9% over the year to $18.03 billion, missing the Street’s forecast of $18.23 billion for the quarter. This was the fifth straight quarter when revenue for the company declined. Net income for the year came in at $1.7 billion, or $1.87 per share compared with previous year’s net income of $2.69 billion, or $2.94 a share. Adjusted net income for the quarter was $2.68 per share compared with the market’s expectations of $2.66 per share.

By segment, Cloud & Cognitive Software revenue that includes Red Hat grew 6% over the year to $5.3 billion, driven by growth in security, IoT, data and AI platforms, and hybrid cloud revenues. Revenues from Red Hat grew 19% to $371 million. On a trailing 12-month basis, cloud revenues came in at $20 billion with the third quarter accounting for $5 billion.

Revenue from the Global Business Services segment grew 1% to $4.1 billion. Global Technology Services revenues fell 6% to $6.7 billion. Revenues from Systems segment fell 15% to $1.5 billion, Global Financing fell 12% to $343 million, and Other segment was down 78% to $107 million.

IBM expects to end the year with GAAP diluted earnings per share of at least $12.80, in line with the market’s estimates for the year.

IBM’s AI Focus

IBM continues to drive growth by leveraging its AI platform Watson. Recently, it announced that it had joined a global consortium of partners, led by marine research organization ProMare, to build a fully-autonomous ship that will cross the Atlantic in September 2020. Being called the Mayflower Autonomous Ship (MAS), the vehicle will use IBM’s AI, cloud, and edge computing technologies to navigate across the ocean from Plymouth, England to Plymouth, Massachusetts.

If successful, the project will help provide a cost-effective and flexible platform for gathering data that will help ensure conservation of the ocean and its ecosystem. The vessel will carry three research pods that will include a wide range of sensors and scientific instruments useful in understanding maritime biology, security, and oceanic conditions.

Earlier this month, IBM also introduced a new integrated supply chain suite that has been embedded with Watson AI and IBM Blockchain. The Sterling Supply Chain Suite is open to developers and will help organizations make their supply chains smarter. It has been built on the Sterling B2B Network and Sterling Order Management tools to enable manufacturers, retailers, and other businesses to integrate critical data, business networks, and supply chain processes. Data from Watson, IBM Blockchain, and IoT will help these supply chains to auto-correct and provide greater reliability to the organizations. Through the offering, it wants to address a market estimated at $50 billion.

Within the healthcare segment, IBM recently announced a tie-up with Guerbet, a global specialist in contrast agents and solutions for diagnostic and interventional medical imaging. As part of the partnership, the two will work together to co-develop and co-commercialize an AI solution to help diagnose and monitor patients with prostate cancer. IBM had entered into a similar agreement with Guerbet in 2018 to monitor patients with liver cancer.

IBM’s stock is currently trading at $134.26 with a market capitalization of $118.9 billion. It touched a 52-week high of $152.95 in July this year. The stock has climbed from $105.94 that it had fallen to in December last year.

This segment is a part in the series : Cloud Stocks

. Smartsheet Acquiring Bootstrapped Startups to Drive Growth
. Bootstrapped Unicorn Atlassian is Acquiring Capital Efficient Startups
. Netflix Price Hike Ruffles Competition
. How Will Carbon Black Differentiate?
. ServiceNow Grows Through Addition of Capital-Efficient Startups
. Zendesk and Freshworks Follow Different Acquisition Strategies
. Tableau Grows Through Small Acquisitions
. Open Platform Strategy Stands Intuit in Good Stead
. SaaS Companies NEED PaaS Strategy
. Will GoDaddy Follow the PaaS Route?
. Calling ALL PaaS Leaders
. Adobe Delivers Via PaaS
. A Look at Oracle’s 2018 M&A Activity
. What Apps Will Drive More Traction for Cloudera?
. Slack's App Focus Will Be Key to Post-IPO Success
. IBM Counts on its Cloud and Platform for the Turnaround
. Atlassian Acquires From its PaaS Marketplace
. What Should SAP Acquire to Triple its Value by 2023?
. Expect ServiceNow to Acquire From App Marketplace
. Should Follow a PaaS Strategy?
. Six Cloud Stock Picks Based on PaaS Prospects
. How Upwork Can Leverage the Virtual Company Trend
. Qualys Scouting For Acquisitions
. Should SAP Acquire Zendesk or Freshworks?
. HubSpot Counts on its API Strategy
. SurveyMonkey Eyes Acquisitions for Growth
. Workday Wants to Disrupt Cloud Computing Using Machine Learning
. Einstein and Open-Source Platform Lead the Charge for Salesforce
. DocuSign Prepares to Beat Rival Adobe
. Veeva Soars, But Dassault Acquires Medidata for $5.8 Billion
. Tableau Acquisition Signals Massive Analytics Push for Salesforce
. Oracle Joins Hands with Microsoft to Take on Amazon
. GoDaddy is Making Strategic Acquisitions for the Next Level of Growth
. Alteryx Sees Strong Momentum
. Adobe Leveraging Magento and Marketo to Deliver Blockbuster Performance
. Is Slack Overvalued?
. How Will Cloudera Address the Competition?
. Zoom is Not Bothered by Cisco or Microsoft
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. Netflix Plays with Pricing and Games to Attract Subscribers
. CrowdStrike Has a Successful IPO
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. Medallia Banks on Acquisitions
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