The current pandemic has accelerated the need of all organizations to implement their digital transformation strategies. IBM (NYSE: IBM) is benefitting from this accelerated pace of transition. The company recently reported its first-quarter results that surpassed market expectations.
Revenues for the first quarter fell 2% $17.7 billion, ahead of the Street’s estimates of $17.35 billion. Adjusted earnings of $1.77 a share were also ahead of the $1.63 that the market predicted.
By segment, revenues from Cloud & Cognitive Software that includes Cloud & Data Platforms such as Red Hat, Cognitive Applications, and Transaction Processing Platforms grew 0.8%to $5.4 billion. Within the segment, Cloud & Data Platforms grew 2% driven by Red Hat.
Revenues from Global Business Services (GBS) that includes Consulting, Application Management and Global Process Services grew 2.4% to $4.2 billion. Revenues from Global Technology Services (GTS) that includes Infrastructure & Cloud Services and Technology Support Services fell 15.3% to $6.4 billion. Revenues from its Systems segment that includes Systems Hardware and Operating Systems Software grew 2.2% to $1.4 billion and Global Financing revenues fell 21.9% to $240 million.
IBM did not provide any outlook for the second quarter of the year.
Recently, IBM announced the acquisition of Italy-based myInvenio. Founded in 2013 by Massimiliano Delsante, myInvenio provides process mining capabilities that make the optimization of complex core business processes easier. It automatically discovers end-to-end processes for fast and intuitive visualization and constantly monitors compliance and performance from enterprise data. Its solutions help reveal inefficiencies and bottlenecks within processes and help identify tasks that can benefit from automation. It also helps run simulations to identify automation opportunities so that organizations can conduct cost benefit analysis of applying automation capabilities.
IBM hopes to leverage the acquisition to give organizations data-driven software that will help in identifying the most impactful business processes that can be automated with AI. It will help advance IBM’s hybrid cloud and AI strategy and provide its customers with a comprehensive suite of AI-powered automation capabilities. The acquisition will allow IBM to help companies accelerate the process of streamlining business processes, thus driving innovation and lowering costs. IBM will integrate myInvenio’s capabilities into its Automation portfolio that already includes IBM Cloud Pak for Business Automation, IBM’s hybrid cloud software that uses AI to transform business processes. Financial details of the acquisition were not disclosed. myInvenio’s pre-acquisition funding details are not disclosed.
For the past few quarters, IBM has been focusing on transforming itself into a hybrid cloud platform and AI company. For its hybrid cloud business, it is positioning Linux, Containers, and Kubernetes as the foundation of the hybrid cloud platform. With an impressive software portfolio, the three platforms are allowing IBM to provide customers with industry-specific public cloud services. IBM realizes the importance of a platform ecosystem. It is seeing how every dollar of platform spend translates into an opportunity where “clients spend $3 to $5 in software, and $6 to $8 in services”. It realizes how platform ecosystem growth is translating to growth for both IBM and its developer partners.
Within AI, IBM is focused on helping companies use its AI capabilities to drive business outcomes. Recently, it entered into a partnership with Palantir to simplify how businesses build and deploy AI applications across public clouds, private clouds, and on-premise. The partnership will allow IBM and Palantir to build a new offering called Palantir for IBM Cloud Pak for Data that will enable clients to scale AI. IBM plans to continue to expand its AI ecosystem by building on partnerships with other companies like Box, Cloudera, and MongoDB.
The transition has been a slow process. This was the first time in the last four quarters that IBM actually reported revenue growth. IBM’s Cloud revenues for the quarter were also impressive. Revenues from its Cloud and Cognitive Software division, which includes Red Hat and Watson, not only grew 4% over the year to $5.4 billion but were also above the market’s estimated $5.30 billion. Red Hat’s revenues grew 17%. IBM has about 3,000 hybrid cloud platform clients now and has tripled the revenue base of OpenShift since it acquired Red Hat.
Its stock is currently trading at $138.16 with a market capitalization of $123.46 billion. It touched a 52-week high of $137.07 in March this year and a 52-week low of $105.92 in October.
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