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How IBM’s Technology Services and Cloud Segment Has Performed

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May. 2 2016, Published 2:03 p.m. ET

Strategic imperatives growth

Previously in this series, we discussed IBM’s (IBM) Cognitive Solutions and Industry Services segment’s fiscal 1Q16 performance. Now, let’s take a look at the company’s Technology Services and Cloud Platforms segment’s performance.

This segment encompasses global technology services, as well as the company’s cloud infrastructure and platform capabilities in fiscal 1Q16. WebSphere and related software offerings come under this segment with the aim to integrate software to enterprise-grade hybrid clouds.

This segment’s revenues fell by 1.5% to $8.4 billion in fiscal 1Q16. However, in constant currency terms, this segment grew by 2%. Within this segment, Integration Software business declined by 4% to $1 billion.

The Strategic Imperatives business under this segment also grew. Its revenue within this segment grew by 45%, in which cloud revenues played a prominent role. IBM’s cloud revenue grew by 50% in this segment.

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Hybrid cloud infrastructure engagements

Martin Schroeter, senior vice president and chief financial officer of IBM, stated that hybrid cloud infrastructure engagements drove growth in strategic imperatives in the Technology Services and Cloud Platforms segment.

In February 2016, IBM partnered with VMware (VMW) to strengthen its position in the hybrid cloud space. With this partnership, existing IT workloads can be migrated through VMW’s virtualization software without requiring any rewriting, packaging, or modification.

According to Synergy Research’s recent report, IBM continued to be a top performer in the hybrid cloud space while Amazon (AMZN) ruled the overall cloud space in 2015. In 2015, Microsoft (MSFT) recorded the highest growth, at 128%, in the cloud space.

Investors interested in exposure to IBM could consider investing in the Technology Select Sector SPDR ETF (XLK). XLK has about 38% exposure to application software and invests almost 3.1% of its holdings in IBM.

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