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IBM Quarterly Revenue Miss Displays Cloud Struggles Continue

(Bloomberg) – International Business Machines Corp. reported quarterly revenue that shattered analysts’ estimates, signing off CEO Arvind Krishna’s plans to shed former businesses and focus on cloud services that will take longer to come to fruition. Companies fell 6.5% to $ 20.4 billion. in the three months ending Dec. 31, the New York-based company Armonk said Thursday in a statement. That was below the $ 20.75 billion that analysts had predicted, on average, and marked the 10th consecutive quarter with no year-on-year increase. The shares fell in extended trading. October, Krishna announced that it would convert IBM’s managed infrastructure services unit into a separate publicly traded company. The division, currently part of IBM’s Global Technology Services division, deals with day-to-day infrastructure service operations, such as managing client data centers and traditional information technology support for installation, repair and operation of equipment. Although the unit accounts for about a quarter of IBM’s sales and staff, it has seen business shrink as customers embrace the transition to the cloud, and many clients delayed infrastructure upgrades during the pandemic. The spinoff is expected to be completed by the end of 2021. Revenue across IBM’s business segments declined in the fourth quarter. Cloud and Cognitive Software, IBM’s largest unit, saw revenue decline 4.5% from a year earlier. That follows a 7% gain in that unit in the third quarter. Total cloud revenue increased 10% to $ 7.5 billion. In Global Technology Services, revenue fell 5.5% while sales by Global Business Services fell 2.6%. Systems, which include operating system hardware and software, saw sales drop by 18%. Krishna said the company’s actions to focus on cloud and artificial intelligence will “hold,” and give it “confidence that we can achieve revenue growth in 2021.” The company has not given specific financial forecasts since it withdrew its annual projection for 2020 in April. IBM fell about 6% in extended trading after closing at $ 131.65 in New York. The stock has declined by about 5% over the last 12 months. “It’s more or less a reflection of where they are at,” while trying to restructure the business, said Daniel Elman, an analyst at Nucleus Research.IBM who is trying to differentiate itself from its larger competitors in the cloud, like Inc. and Microsoft Corp., by offering a hybrid model, which assists clients with storage and computing across infrastructure on buildings, private cloud services and public provider-run servers. . Krishna was the driving force behind IBM’s $ 34 billion purchase of open source software provider Red Hat in 2018, the first step toward transforming IBM into what it considers a $ 1 trillion hybrid cloud market, and which is now leading much of the company’s growth. Red Hat’s revenue increased 19% in the fourth quarter to $ 1.3 billion. BEIB continues to make acquisitions to strengthen its cloud credentials. The company has made seven cloud and AI-focused acquisitions since October, Chief Financial Officer James Kavanaugh said in the release, including Taos Mountain LLC, a company that helps companies move software and data on- online, and Instana, which manages cloud applications. Court-quarter earnings excluding some expenses were $ 2.07 a share, beating the analyst’s estimate of $ 1.79 an average. Gross profit was 52.5%, 1.3 percentage points higher than analysts expected. (Updates with analyst comment were in the seventh paragraph. A previous version of this story corrected the spelling of the CEO’s name in the first paragraph.) For more articles like this, visit us at bloomberg.comDescribe now to stay ahead of the most trusted source of business news. © 2021 Bloomberg LP