IBM posts weaker-than-expected results as SAP raises full year outlook
IBM CEO Arvind Krishna says it will focus on hybrid cloud and AI in the near future
IBM stocks fell as much as five per cent on Wednesday after the company released its quarterly results - for the last time before the spinout of its Kyndryl managed IT services arm in early November.
The firm's Q3 results were largely in line with Wall Street estimates, although revenue was on the weak side.
The company reported $17.6 billion in revenue, up 0.3 per cent YoY but a little below the analysts' forecast of $17.8 billion.
IBM told investors revenue was up 2.5 per cent excluding Kyndryl, or 1.9 per cent after adjusting for currency and divested businesses.
For the year to date, which now covers three quarters, IBM has posted 1.6 per cent growth.
The revenue from its Global Business Services (including Consulting, Application Management and Global Process Services) was up 11.6 per cent, to $4.4 billion.
Cloud and Cognitive Software business, including Red Hat, contributed $5.7 billion, up 2.5 per cent, while global consulting unit revenue climbed 12 per cent, to $4.4 billion.
Systems revenue, including hardware and OS software, was $1.1 billion, down about 12 per cent. IBM said the drop was driven by declines in IBM Z and Power systems.
"With the separation of Kyndryl early next month, IBM takes the next step in our evolution as a platform-centric hybrid cloud and AI company," said Arvind Krishna, IBM chairman and chief executive officer.
"We continue to make progress in our software and consulting businesses, which represent our higher growth opportunities. With our increased focus and agility to better serve clients, we are confident in achieving our medium-term objectives of mid-single digit revenue growth and strong free cash flow generation."
Future is bright at SAP
Meanwhile, German business software group SAP said on Thursday that the demand for its cloud business database was growing as the company confirmed the preliminary third-quarter figures that it announced last week.
SAP's operating profit (non-IFRS (international financial reporting standards)) rose to €2.1 billion from €2.07 billion last year. Total revenue increased to €6.9 billion (IFRS) from €6.5 billion, with cloud revenue up to €2.4 billion from €2 billion.
SAP reported IFRS cloud revenue of €2.3 billion in Q2 this year.
The company noted that the current backlog from its cloud business database S/4HANA was up 60 per cent, to €1.3 billion in the third quarter.
The company also won 500 new S/4HANA clients in Q3, and the RISE programme (SAP-focused digital transformation/migration) helped to add a further 300 customers.
'SAP is seeing continued strong demand and adoption of its 'RISE with SAP' offering which customers of all sizes, including an increasing number of large clients, are selecting to manage their business transformation,' the company said.
'As more customers adopt this holistic subscription offering, software licenses revenue decreased as anticipated.'