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IBM History – What Does IBM Do?

International Business Machines Corp (IBM)

International Business Machines Corporation (IBM), incorporated on June 16, 1911, is a technology company. The Company operates through five segments: Cognitive Solutions, Global Business Services (GBS), Technology Services & Cloud Platforms, Systems and Global Financing.



Cognitive Solutions

The Cognitive Solutions segment delivers a spectrum of capabilities, from descriptive, predictive and prescriptive analytics to cognitive systems. Cognitive Solutions includes Watson, a cognitive computing platform that has the ability to interact in natural language, process big data, and learn from interactions with people and computers. These solutions are provided through delivery methods, including through cloud environments and as-a-Service models. Cognitive Solutions consists of Solutions Software and Transaction Processing Software.

Global Business Services

The GBS segment provides clients with consulting, application management services and global process services. The portfolio of GBS services is backed by its globally integrated delivery network and integration with IBM solutions and services, including Watson, cloud, blockchain and Technology Services. It offers Watson Inter of Things (IoT) Consulting Solutions. Under application management, it delivers system integration, application management, maintenance and support services for packaged software, as well as custom and legacy applications. Its business process outsourcing service line delivers finance, procurement, human resources and industry-specific business processes.

Technology Services & Cloud Platforms

The Technology Services & Cloud Platforms segment provides information technology (IT) infrastructure services. It delivers a portfolio of cloud, project-based, outsourcing and other managed services focused on clients’ enterprise IT infrastructure environments. The portfolio includes a set of hybrid cloud services and solutions to assist clients in building and running enterprise IT environments that utilize public and private clouds and traditional IT. Its Cloud Infrastructure-as-a-Service covers a range of workloads. Its capabilities include IBM Cloud, cognitive computing and hybrid cloud implementation. It delivers a line of support services to maintain the availability of clients’ IT infrastructures. These offerings include maintenance for IBM products and other technology platforms, as well as software and solution support. It delivers hybrid cloud solutions through its Bluemix Platform-as-a-Service solution.


The Systems segment provides clients with infrastructure technologies. It offers a range of systems designed to address computing capacity, security and performance needs of businesses, hyperscale cloud service providers and scientific computing organizations. The portfolio includes z Systems, an enterprise platform for integrating data, transactions and insight, and Power Systems, a system designed from the ground up for big data and analytics, optimized for scale-out cloud and Linux. The storage products portfolio consists of a range of software-defined storage solutions, flash storage, disk and tape storage solutions. The segment also consists of operating systems software.

Global Financing

The Global Financing segment includes client financing, commercial financing, and remanufacturing and remarketing. Its client financing offers a lease, installment payment plan and loan financing to end users and internal clients. Commercial financing offers short-term inventory and accounts receivable financing to suppliers, distributors, and marketers of IBM and original equipment manufacturer (OEM) products. Remanufacturing and remarketing assets include used equipment returned from lease transactions or used surplus equipment acquired internally or externally. The Company also sells the equipment that it purchases from Global Financing to external clients.

The Company competes with Alphabet Inc.,, Inc., Cisco Systems, Inc., Microsoft Corporation, Oracle Corporation,, SAP, Accenture, Capgemini, Computer Sciences Corporation, Fujitsu, Hewlett-Packard, BMC, VMWare, Dell Technologies, Pure Storage, HP and General Electric Company.

What does IBM do? How do they make money?

For the recently reported quarterly results, IBM’s (NYSE: IBM) restructuring continued to translate into declining revenues. This was the sixteenth straight quarter of declining revenues for IBM. Analysts believe that the trend will continue through the end of the year as IBM continues to reorganize its portfolio to move away from computer hardware sales to focus on “strategic imperatives”, which include the cloud, analytics, and mobile computing focused businesses in multiple sectors including healthcare and financial services.

IBM’s Financials

IBM’s first quarter revenues fell 5% over the year to $18.7 billion, ahead of the market’s expectations of $18.29 billion for the quarter. EPS of $2.35 was also ahead of the Street’s projections of $2.09 for the quarter. On a constant currency basis, IBM’s revenues would have reported a 2% decline over the year.

By segment, revenues from Cognitive Solutions fell 2% over the year to $3.98 billion. Global Business Services revenues declined 4% to $4.12 billion. Revenues from the Technology Services & Cloud Platforms fell 2% to $8.42 billion while Systems revenues reported the biggest decline at 22% to $1.68 billion. Global Financing revenues were down 11% to $410 million and revenues from other sources fell 2% to $66 million. This was the first quarter that IBM broke out revenues from new reporting segments. The Cognitive Solutions segment includes its Watson project.

Overall, IBM is seeing strong benefit from its cloud-based investment strategies. During the quarter, revenues from its strategic initiatives, which includes the cloud, analytics, and engagement initiatives, grew 14% over the year. Total cloud revenues grew 34% and for the trailing twelve-month period, Cloud delivered revenues of $10.8 billion. The annual exit run rate for cloud delivered as a service alone has grown to $5.4 billion from $3.8 billion a year ago. Among other strategic investments, revenues from Analytics have grown 7%, mobile business 88%, and security revenues have increased 18% over the year. Together, these strategic imperatives now account for 35% of IBM’s revenues, compared with a 22% share two years ago. IBM is targeting to grow this segment to $40 billion revenues by 2018.

For the current year, IBM projected an EPS of at least $13.50 and an EPS of $2.85 for the current quarter. The market was looking for an EPS of $3.44 for the current quarter.

IBM’s Cloud Focus

During the quarter, IBM remained focused on its Cloud segment. Last week, it announced new services that will help companies design and develop blockchain technology in a secure environment in the cloud. Blockchain is the technology behind bitcoin and is a digital tool that helps with recording and verifying transactions. Tech gurus believe that the technology will simplify the process of building cost-efficient business networks without requiring central control. It is already being explored by major Wall Street players like Goldman Sachs as a mechanism to solve financial market inefficiencies.

IBM’s new service will help organizations work on blockchain networks that will run securely in the cloud. It is doing that by providing cloud services with the highest Federal Information Processing Standards and Evaluation Assurance Levels to help the government, financial services, and healthcare sector to leverage blockchain technology. It also opened IBM Garages in New York and London that are dedicated research labs focused on helping clients design and develop blockchain networks. IBM’s move on blockchain technology will help strengthen its presence in the fintech markets as it is the first company to have developed and released a production-scale operating environment for the technology that meets such high compliance standards.

It also recently announced an expansion of its flash storage portfolio that will help clients quickly extract value from data. The new all-flash array products come with a minimum latency of 250 microseconds for accessing data for cloud-based applications and workloads. Called the FlashSystem A9000 and A9000R, the products will come fully configured to help drive down implementation costs. They are built on grid architecture to provide easy scaling up to the petabyte range and will include data reduction features such as pattern removal, deduplication, and real-time compression.

Clearly, IBM is ensuring that its technology is far superior to its competitors. The worrying factor though is the speed at which IBM is transitioning. Its stock is trading at $144.25 with a market capitalization of $138.47 billion. It touched a 52-week high of $174.44 in May last year. It has recovered from its 52-week low of $116.90 that it fell to in February this year.

In addition to all the existing comments, I would like to point out that:

  • IBM is indeed very large in services at the moment (GBS + GTS alone contribute about 50% of the revenue)
  • IBM however is still a giant player in enterprise software and hardware. Some of these are just accounting tricks. For example, lots of services contracts can be categorized into software supports (and/or consulting).
  • If you look at the profit, software contributes a much larger percentage than looking at revenue since software produces a much higher margin.

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Updated: October 17, 2018 — 4:18 am


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