Tech giant International Business Machines (IBM) has publicly warned investors that revenues for 2016 are going to be lower than initially expected.
The end of 2015 marked the 15th consecutive quarter of sales drops. Fourth quarter revenue dropped by 8.5%.
While this may seem troubling to some, IBM’s overall profit still managed to hit tens of billions of dollars. According to the Wall Street Journal, 35% of IBM’s $29 billion revenue in 2015 was attributed to data analytics, cloud computing, mobile computing and security products.
The Daily Mail Times believes cloud computing is the chief threat against IBM’s success, citing the rise and subsequent competition of Amazon Web Services as one of the perpetrators of revenue loss at IBM.
However, IBM experienced significant revenue from their cloud computing venture, reaching upwards of $10 billion. The lack of profits stemmed from other aspects of their business that have lost value but continue to cost significant resources (hardware, software, services, etc).
IBM CEO Ginni Rometty has vowed to undergo a total corporate reinvention in order to solve their current predicament. She sold multiple IBM businesses to help draw focus to the underdeveloped aspects of IBM’s business model, such as cloud computing.
By taking attention away from making chips and managing servers, IBM will pour that focus into developing and improving their cloud computing.
By choosing to take the route of divestitures, Rometty hopes to translate the significant profits made by specific areas of their business into an overall revenue increase.
One study, conducted by the Emergent Research and Intuit, predicted that 80% of small businesses will be using cloud computing by 2020. Considering the impending dominance of cloud computing, the company is hoping that by growing and innovating their cloud computing technology, 2016 will prove a profitable year.
IBM’s overall earnings reached $4.46 billion, which translates to $4.59 a share.
The global technology segment revenue dropped 7.1% while software segment revenue fell 11% and systems hardware decreased 1.4%.