IBM sales continue to decline, although profit is higher than expected

IBM’s turnover continues to decline. IBM states that the purchase of Red Hat will yield substantial growth, but the company’s sales have again declined by 4.2 percent last quarter. However, the profit was higher than expected, the profit rose 3.9 percent to 2.5 billion dollars.

IBM has been renewing its portfolio and investing in new solutions for several years now. Many of IBM’s existing products are becoming less and less popular, which means that sales continue to decline. One of the new converters has to become the cloud market. With 5 percent growth for IBM’s cloud services, there seems to be a bright spot on the horizon, but the fact remains that IBM is lagging far behind in growth compared to AWS or Microsoft. With growth of 41 percent in the first quarter of the fiscal year for AWS and 73 percent in the third quarter for Microsoft, the growth of IBM’s cloud services is relatively modest. This is another challenge, a challenge that the acquisition of Red Hat is intended to solve. We’ll have to find out in the future whether that’s going to work.

However, IBM’s expectations for the full year are likely to be met, especially if the acquisition of Red Hat is not taken into account in this case. According to Ginni Rometry, CEO of IBM, IBM’s high-value business units will continue to grow: With the completion of our acquisition of Red Hat, we will offer the only truly open and hybrid multi-cloud platform in the industry, strengthening our leadership position and uniquely helping our customers to succeed in the next chapter of their digital re-inventions.

Red Hat as a secret weapon

IBM ended the second quarter with reserves of 46.4 billion U.S. dollars, of which 34 billion were recently used to complete the acquisition of Red Hat. The open-source company currently seems to be one of the biggest assets in IBM’s plan to close the gap to the competition: “On August 2, we will discuss how the acquisition of Red Hat will accelerate IBM’s revenue growth, will contribute to our high-value model and will improve the flow of free financial reserves in the future,” said James Kavanaugh, senior VP and CFO at IBM.