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IBM Continues to Grow Cloud Business

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IBM reported its first quarter fiscal 2016 earnings on April 18, showing strong growth in the areas it defines as strategic imperatives, which includes the cloud, analytics and engagement.

For the quarter, IBM reported revenue of $18.7 billion, which is a decline of five percent from the first quarter of 2015. Net Income was reported at $2.3 billion for a 21 percent year-over-year decline. Taking the narrow focus of IBM’s strategic imperatives the financial picture is significantly more positive with revenue of $7 billion for a 14 percent, year-over-year gain. Looking specifically at cloud, IBM reported first quarter revenue of $2.6 billion for a 34 percent gain over the first quarter of 2015.

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Looking specifically at the software-as-a-service element of cloud, IBM’s revenues grew by 46 percent year-over-year.

“Our view on cloud is that enterprises see the most value in hybrid cloud solutions that enable new business models while leveraging existing systems and data,” Martin Schroeter, Senior Vice President and Chief Financial Officer at IBM said during his company’s earnings call.

During the first quarter, IBM expanded its cloud capabilities by acquiring web streaming service Ustream. With Ustream, IBM has now formed a new cloud video services unit providing video services and digital analytics.

“Ustream provides cloud-based video streaming and on-demand video to about 80 million viewers per month for customer such as Facebook, Nike, the Discovery Channel, Samsung, and NASA,” Schroeter said.

While cloud is a positive area of growth for IBM, its hardware business had a challenging quarter. IBM systems revenue, which includes hardware and operating systems software, was reported at $1.7 billion for a 21.8 percent decline. Schroeter blamed the z System mainframe product cycle for the decline. He noted that in 2015 z System revenue spiked when IBM launched its new z13 mainframe.

IBM’s Power systems also reported a first quarter decline.

“After four quarters of growth, Power revenue was down double digits as we ramped on a strong performance in UNIX-based entry systems from last year,” Schroeter said. But we had continued momentum in our Linux offerings and expansion of OpenPOWER efforts.”

Schroeter added that IBM has been focused on the growth in Power-based Linux systems and they’ve now grown to about 10 percent of the overall revenue base.

“We recently signed a deal with a large enterprise in China that is dramatically growing its Linux server footprint, and has chosen Linux on Power partly because they can do it with half of the footprint they would have required with x86,” Schroeter said.

Sean Michael Kerner is a senior editor at Datamation and Follow him on Twitter @TechJournalist

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