IBM’s cloud offerings report good growth
In 2014, IBM’s (IBM) cloud-related technologies generated revenues of $7 billion, an increase of 60% on a year-over-year basis. Cloud delivered “as a service” revenue stood at $3 billion, an increase of approximately 75% on a year-over-year basis. The segment ended the year with an annual run rate of $3.5 billion.
IBM’s strategic growth areas (cloud, analytics, mobile, social and security business) collectively reported revenues of $25 billion, an increase of 16% on a year-over-year basis. These strategic areas collectively contributed 27% towards overall revenues. IBM aims to invest $4 billion in these rapidly growing businesses and increase their contribution by 44%, or $40 billion, towards overall revenues by 2018.
According to a Synergy Research report, IBM leads the hybrid cloud space. Amazon (AMZN) continues to be a leader in the cloud space. As we’ll see in the later part of the series, IBM has taken various initiatives to strengthen its position in this space where it expects future growth.
To gain diversified exposure to IBM, you can invest in the iShares US Technology ETF (IYW) and the Technology SPDR (XLK). IYW and XLK invest about 4.2% and 3.51% of their holdings in IBM, respectively.
Deals that bring visibility to the company’s cloud revenues
In late 2014, IBM and Deutsche Lufthansa AG signed a seven-year deal worth $1.23 billion. As part of the deal, IBM will manage Lufthansa’s data center operations and infrastructure services. The deal will help Lufthansa to develop new solutions in the area of business analytics, and mobile and cloud computing services.
In December 2014, IBM signed a deal with ABN Amro to provide infrastructure as a service (or IaaS) that is said to be a ten-year multi-billion dollar deal. IBM also signed a seven-year $1.25 billion deal with WPP (WPP), an advertising firm, to run the company’s operations in the cloud. These deals will bring visibility and continuity to IBM’s cloud revenues.