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IBM Grows Cloud Revenues in 2Q16

IBM reported its second quarter fiscal 2016 earnings on July 18, with declining hardware revenues but a growing cloud business. For the quarter, IBM reported revenue of $20.2 billion, which is a three percent year-over-year decline. Net Income was reported at $2.5 billion for a 29 percent decline from 2015. IBM’s cloud business, however, is […]

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Sean Michael Kerner

Jul 19, 2016

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IBM reported its second quarter fiscal 2016 earnings on July 18, with declining hardware revenues but a growing cloud business.

For the quarter, IBM reported revenue of $20.2 billion, which is a three percent year-over-year decline. Net Income was reported at $2.5 billion for a 29 percent decline from 2015. IBM’s cloud business, however, is growing rapidly with second quarter revenue reported at $3.4 billion for a 30 percent gain over the second quarter of fiscal 2015. Over the last twelve months, IBM has generated $11.6 billion in total cloud revenue.

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A large part of IBM’s cloud-as-service efforts are delivered by way of the company’s Bluemix platform. During the second quarter IBM expanded Bluemix with an Apache Spark development environment for data scientists. As well, IBM expanded its OpenWhisk event driven programming platform, which is referred to as ‘serverless’ computing by some analysts.

“We also announced a breakthrough in making quantum computing available on the IBM cloud,” Martin Schroeter, SVP and Chief Financial Officer at IBM said during his company’s earnings call. “The IBM Quantum Experience is a great example of how cloud is making emerging technologies available that wouldn’t have been accessible in the past. “

Schroeter added that since launching in May, there have been 175,000 experiments run on the IBM Quantum Experience through active users in nearly 150 countries.

“This kind of open innovation will allow for the next stage of development in quantum information technology and help push a universal quantum computer to reality even faster,” Schroeter said.

There are also some big deals that are helping to accelerate IBM’s cloud growth, including a seven-year $1.3 billion deal with CSC. Additionally Schroeter cited a deal with industrial manufacturing firm Pratt & Whitney, which will see business, manufacturing, and engineering enterprise systems moving to a fully managed environment on the IBM cloud.

“They’re expecting to double their engine production by 2020 and we’ll provide them with the means to manage, analyze, and grow their infrastructure dramatically to accommodate the company’s growth,” Schroeter said.

While cloud is growing, IBM’s hardware business is not. IBM reported system revenue of $2.0 billion for the quarter down 23.2 percent year-over-year. A lot of the revenue decline is tied to the diminishing market for UNIX, which is why IBM is taking direct aim at the growing Linux market.

“This quarter we grew year to year and quarter to quarter with our Linux on Power strategy. It is becoming a more meaningful part of our business with over 10 percent of our POWER revenue in the second quarter,” Schroeter said.

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