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IBM’s Cloud Business Generates $7 Billion in 2014 Revenue

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The cloud is big business, just ask Big Blue. IBM reported its fourth quarter fiscal 2014 earnings on January 20, with the cloud being a big driver of growth.

For the fourth quarter, IBM reported $24.1 billion in revenue from its continuing operations, down 12 percent on a year-over-year basis. For the full fiscal 2014 year, IBM reported revenue of $92.8 billion, down by six percent year-over-year. Net Income for the fourth quarter came in at $5.5 billion for an 11 percent decline, while full year Net Income was reported at $15.8 billion, for a seven percent year-over-year decline.

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2014 was a year of transition for IBM, with the company selling off its x86 business to Lenovo in a deal valued at $2.3 billion. IBM also gave up its silicon manufacturing business to Global Foundries.

With IBM’s exit from several hardware businesses, its cloud business growth has been booming, with reported cloud revenue of $7 billion in 2014.

“We introduced our cloud platform-as-a-service Bluemix and are shifting capital to globally expand our SoftLayer Cloud Data Centers,” Martin Schroeter, Senior Vice President and CFO of IBM said during his company’s earnings call. “We’re bringing Watson’s capabilities to the enterprise and building a partner ecosystem, effectively creating a market for cognitive computing.”

Hardware is still important to IBM and Schroeter highlighted areas where IBM has been active in 2014. IBM’s System z mainframe business revenue declined by 26 percent in 2014. Schroeter said that the mainframe revenue decline was a reflection of the fact that IBM was in the tenth and final quarter of the product cycle. On January 13, IBM announced its new generation mainframe the z13 platform.

IBM’s other hardware business is the Power system group, which experienced a 13 percent revenue decline in 2014. Schroeter is optimistic about Power moving forward.

“We have repositioned Power, which is now a systems business, as well as an open chip processor and an IP opportunity through the OpenPOWER foundation,” Schroeter said. “We saw double-digit growth in the low-end, driven by entry-level POWER8-based systems and in the fourth quarter, we introduced our high-end Power 8 enterprise systems. “

Overall while cloud is helping to grow part of IBM’s business, it is also having other impacts throughout the IBM product portfolio.

“For example, while we are fully participating in the shift to cloud, margins are impacted by the level of investment we are making, and the fact that the business is not yet at scale,” Schroeter said. “We will see some year-to-year benefit to margins in 2015 as the business ramps, but we won’t yet be at scale.”

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

Photo courtesy of Shutterstock.

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