Growing z13 business not enough to help IBM's declining revenue


In its second quarter earnings, IBM cited its exit from the hardware space for its continued decline in revenues and slumping profits. This is the thirteenth consecutive quarter of year-over-year that revenue has dropped for Big Blue.

The company reported revenue of $20.8 billion (£13.37 billion, AU$28.22 billion), down from $24 billion (£15.42 billion, AU$32.57 billion) a year ago. Earnings fell 17%, with Big Blue reporting $3.45 billion (£2.22 billion, AU$4.68 billion) in net income.

Part of the reason, IBM explained, is due to the strong US dollar and from its sale of its x86 server business to Lenovo, which had previously acquired IBM's ThinkPad and PC business in 2005. Without these factors in play, IBM claimed that revenue would have declined just 1% year-over-year.

A bright spot

Not all news was bad for IBM. The company had launched its new z13 mainframe earlier this year, and sales of the z13 are showing positive growth. Sales of mainframe are up 9% from the prior quarter, and without the currency impact of a strong US dollar, sales would have been up 15%.

IBM's cloud business posted strong performance numbers. Revenues for the cloud business increased more than 50%, and not accounting for currency fluctuations that number is closer to 70%.

Hardware exit

Last year, IBM announced that it will sell its System X server business to Lenovo. Globalfoundries will take over manufacturing for IBM's semiconductor business. These divestitures dragged hardware revenue down by as much as 32%. However, not including divestitures and currency fluctuations, hardware sales increased by 5%.