IBM is moving to newer business ideas, such as cloud and security services, to help it beat examiners’ quarterly income estimates, IBM indicated at sales growth after six years of decline.
IBM has been concentrating on cloud, cybersecurity and data analytics, what the organization calls its “key goals,” to counter a brief decline in the hardware and software businesses. Its revenue rose to $19.15 billion compared to $18.6 billion expected by analysts, according to Thomson Reuters.
“The mainframe is going to drive a lot of the positive growth in the fourth quarter,” said Josh Olson, an analyst at Edward Jones & Co. “When you’re selling mainframes, you’re also selling a lot of software and services with that.” He rates the stock as a hold.
Cloud income for the quarter was $4.1 billion, up 20 percent from a year ago. IBM said it had a $9.4 billion yearly income run rate for cloud services in view of third quarter income, up 7 percent from $8.8 billion in the second quarter and up 25 percent year over year. IBM’s global business services division created $4.09 billion in income, down 2 percent, and its systems division got $1.72 billion in income, up 10 percent. But the mainframe computer business is repetitive, and examiners aren’t persuaded that IBM can manage development after server deals begin to wane.
“They definitely have some potential going into 2018 in certain parts of the business, and you couldn’t say that a few years ago,” said Daniel Ives, head of technology research at GBH Insights. “It’s an execution story, and 2018 will be a huge proving year for Rometty and IBM.”
The organization’s net pay tumbled to $2.73 billion, or $2.92 per share, in the third quarter, from $2.85 billion, or $2.98 per share, a year earlier. Excluding one-time products, IBM earned $3.30 per share, beating examiners’ assessments of $3.28. The shares rose as much as 5.3 percent in late trading to $154.33. “Cognitive solutions has attracted a lot of our investment, and when we look at underlying performance, it captures and reflects a lot of the new strategic imperative areas we’re going into,” IBM’s Chief Financial Officer Michael Schroeter said. These “strategic imperatives” include analytics, security and Watson-branded products and are a key indicator for IBM’s future success. “We saw pretty broad-based growth across all cognitive solutions elements,” he said.