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IBM: Ginni Rometty's Turnaround Shows Progress, But Hardware Is Still A Problem

IBM: Ginni Rometty's Turnaround Shows Progress, But Hardware Is Still A Problem
Enterprise2 min read

IBM Ginni Rometty

Flickr/IBM

IBM CEO Ginni Rometty

IBM has been spurting out good news this month like dandelions gone to seed.

Here's a few highlights:

Then it celebrated all this news with a much-needed beat over Wall Street's expectations on both revenue and profits when reporting its second quarter on Thursday.

But the company isn't out of the woods yet. Revenue still declined 2% overall.

IBM is banking on several areas to help it grow again: cloud, mobile, and big data.

And it had good news to report on all of those fronts, too. Mobile revenue is up 100%, it says, though didn't give the actual revenue number. Cloud revenue us up more than 50% year-to-date, it says, with hosted services on track to be a $2.8 billion business this year. Big data is up 7% this year, and security revenue up more than 20% year-to-date.

That said, nerves are still high in the company, particularly in its hardware division and especially its microprocessor unit. Rumors have been floating through much of this year that IBM wants to sell that unit and get out of the chip-manufacturing business.

Today's earnings did nothing to calm those fears. Revenues from its microprocessor chip unit were down a big 18% over the year-ago quarter.

Revenues from Power Systems, which use IBM's homegrown Power chips, were down 28%. Plus storage was down 12%, and the unit IBM has agreed to sell to Lenovo, System x, was down 3%. All told, revenues from the hardware unit, Systems and Technology, were $3.3 billion for the quarter, down 11% from the year-ago quarter.

And that means that despite the good progress report, investors are feeling cautious. Shares were down slightly, not quite 2%, in after-hours trading.

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