IBM banks on `strategic imperatives’ despite 21 quarters of revenue fall

Technology giant International Business machines (IBM) reported an earnings boost in the April-June 2017 quarter on the back of an 18 cents per share tax gain, which helped to partially offset its 21st consecutive quarter of declining revenue.

IBM, which is still looking to the future for better news, has been making big investments in cognitive computing, artificial intelligence and cloud computing over the past few years, besides its Watson AI platform.

But a long-awaited revival in revenue from these ''strategic imperatives'' continues to be just around the corner.

IBM's overall revenue fell 5 per cent to $19.3 billion, though growth in its ''strategic imperatives'', including cloud computing, stood at 11 per cent. The share of the new growth sector also formed 43 per cent of IBM's total revenue of $19.3 billion in the second quarter.

IBM also launched its next-generation mainframe in the Z series family that could still drive revenue growth. The new mainframe is reported to be capable of encrypting all data associated with all applications without any performance impact.

Returns from this new growth sector are now expected to come much later than expected.

Analysts expect revenue from the new mainframe to kick in during the fourth quarter, with shipments starting in the third quarter. IBM has projected a $1 billion revenue shortfall in the third quarter.

The mainframe, once IBM's biggest-selling product, still has the ability to give a big boost to its revenue and earnings. IBM reiterated its earnings forecast of $13.80 per share for the full year.

''On the revenue side of that, typically for seasonal reasons, we see about a $1 billion 2Q to 3Q reduction for seasonality,'' said IBM chief financial officer Martin Schroeter. ''That typical $1 billion impact will be helped a little bit, $200 million to $300 million by mainframe or the services contracts, but that's about it for the third. And then obviously the rest will be in the fourth.''

IBM closed Tuesday's trading at $154.00, up $0.99 or 0.65%, on the NYSE. The stock, however, dropped $3.00 or 1.95 per cent in the after-hours trade.