IBM has posted poor financial results for its third quarter of 2014, forcing CEO Ginni Rometty to admit she is "disappointed" with the current state of the company.
IBM reported that net income for the quarter was $3.5bn, down 17 percent from $4.1bn in Q3 2013. Total revenue fell to $22.4bn for the quarter, down four percent from $24.4bn in the same period last year.
Most IBM business units suffered declines during the period. Software revenues were down two percent to $5.7bn, hardware was down 15 percent to $2.4bn, with System z mainframe server products down a sizeable 35 percent.
However, there were a few bright spots. Cloud revenues were up 50 percent year-to-date, while business analytics revenues rose eight percent. Mobile revenues doubled year-to-date and security revenue was up 20 percent year-to-date.
IBM will take some encouragement from this. Like other IT giants such as SAP, IBM is trying to reposition its businesses to take more revenue from emerging areas like cloud software and services and business analytics.
Despite acknowledging these areas of optimism, Rometty was honest about the plight of the company at present, admitting that things were not going to plan.
“We were disappointed in this quarter. Our company, it is fundamentally better positioned that it was a few years ago, but as I have said we have more to do an we need to do it faster," she said on a call to discuss the results.
"But when we talk about what we are doing for the long term, these actions go on the heels of what has been a series of what I think are very bold actions from the entire year with a very clear strategy.
"One that is around moving [from] enterprise IT, to the era of the cloud; one that’s around data and analytics for transforming our client’s industries and professions.”
As part of this effort to improve performance IBM confirmed it was paying Globalfoundries $1.5bn to take its loss-making chip unit off its hands. This deal is expected to close in 2015.
"We are executing on a clear strategy that is moving IBM to higher value, and we've taken significant actions to exit non-strategic elements of the business," explained Rometty.
"This includes the announcement that we will divest semiconductor manufacturing to focus on research and development that will differentiate our systems."
Martin Schroeder, chief finance officer at IBM, added that the decision to rid itself of its chip business had been taken as it had proved impossible to keep pace with the market.
“This is a capital intensive business which has been challenging for us without scale” he said. “We’ll exit a business that was not only capital intensive but also a drag on our profit. Clearly this is the right move for our business in the long term,’ he said.
IBM has already shed its server unit to Lenovo this year as part of efforts to ditch hardware, which is evidently not performing well for the company.
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