FOR IBM, converting to the cloud is taking a toll. Even though it’s necessary to drive future growth, the company has to sacrifice profits for now.
Chief executive Ginni Rometty is focusing on returning IBM to growth through new initiatives like data analytics, mobile and cloud computing – where technology is delivered via the internet, instead of stored onsite. Cloud computing gives clients more flexibility in ordering software and can limit their need for IBM’s servers and mainframes, crimping profits.
“It’s critical for the company to convert those clients to cloud-based solutions, which may impact profitability but will improve visibility in the long term,” Bill Kreher at Edward Jones said. “It is going to require patience.”
That’s because Rometty is trying to transform a 103-year-old company with more than $90 billion (R1 trillion) in revenue and 430 000 employees.
Revenue shrunk across every reported unit and every geography in the fourth quarter, and IBM’s new guidance for 2015 operating earnings trailed estimates. – Bloomberg