IBM sets $40bn target for cloud and software sales by 2018

IBM CEO Ginni Rometty sets out new strategy to breathe life back into IBM

IBM CEO Ginni Rometty has set a target of achieving some $40bn - or 40 per cent - in annual revenues for the company from cloud computing, big data and security by 2018.

The goal was set by Rometty at IBM's annual investor briefing yesterday, and comes after it recently set out plans to slash thousands of jobs and restructure its operations to focus on software, as its hardware sales continue to decline alarmingly, while traditional services have struggled.

Critics, however, might argue that Rometty is simply buying time after earlier ditching profit targets she set when she became CEO in 2012.

Rometty told analysts that the company was lining up cloud, analytics, mobile and security as "strategic imperatives" over the next few years, against current software sales of about $25bn.

It comes as IBM - and other major systems vendors - are struggling with sales in all of their main areas. Last year, IBM's hardware sales dropped by 23 per cent from $13bn to $10bn, a performance capped by the sale of its low-end x86 server line to Lenovo, which had bought IBM's PC division ten years earlier.

Total revenues, meanwhile, had fallen from $98.4bn to $92.8bn, and are expected to continue falling to around $90bn by 2018. Rometty, though, justified the decline in hardware sales in terms of overall profitability.

"Much of the decline in revenue has been engineered by us," Rometty said, adding: "We restructured the hardware business and it is now less than 10 per cent of the company, and we returned that business to profitability."

The company also sold off its floundering semiconductor chip unit to Global Foundries for $1.5bn.

However, Rometty was keen to assert that her strategy isn't based entirely around cutting costs and financial engineering. "It's not a cost-cutting exercise," she said, "it's a very healthy remix."