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IBM sees 70 percent increase in cloud earnings, but hardware continues decline

17 Oct 2013
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IBM's shares have taken a six percent tumble after the firm posted worse than expected financial results, with a four percent drop in revenue. The drop in sales was mainly apparent in growing markets such as China, as well as a continually shrinking hardware market.

In its third quarter 2013 results, Big Blue posted $23.7bn revenues, down 4 percent compared to Q3 2012, and a $4bn profit, up six percent on the same period of 2012. The firm saw significant gains in areas such as its cloud, high-end mainframes and business analytics services.

Major falls came in hardware systems revenue, which dropped by 17 percent as more businesses opt for software-based solutions rather than infrastructure purchases. High-end System z mainframe servers continued to show growth, bucking the overall hardware trend for another quarter with six percent growth.

The firm's growth markets, which include Brazil, Russia, India and China, fell by 15 percent, a figure which IBM's chief financial officer Mark Loughridge said would continue for "another couple of quarters".

The company reported 70 percent growth on its cloud products for the first nine months of 2013, with software overall remaining relatively flat in terms of growth, at one percent. Its Technology Services division saw a decline of four percent.

IBM chief executive Ginni Rometty admitted her firm had failed to reach expectations in terms of revenue, but highlighted the growth in areas which IBM sees as safe bets for the future.

"In the third quarter we continued to expand operating margins and increased earnings per share, but fell short on revenue," she said. "Where we had identified high growth opportunities and pursued them aggressively – cloud, mobile, business analytics and security – we continued to show strong growth.

"This underscores our strategy to continuously transform the company to high value. We are taking action to improve execution in our growth markets unit and in the elements of our hardware businesses that are underperforming."

Last quarter, IBM suffered at the hands of significant layoffs, which ate into its profit margins as it looked to restructure its business for future trends.

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Michael Passingham

Michael Passingham joined V3 as a reporter in June 2013. Prior to working at V3, Michael spent time at computing magazine PC Pro. Michael covers IT skills, social media, tech startups and also produces V3's video content.

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