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Is IBM Poised to Benefit from the next Computing Cycle?



IBM will benefit from increased cloud adoption

IBM (IBM), which has been grappling with no revenue growth, continued the trend in 2016. However, its Strategic Imperatives segment continued to post growth and contribute more to its overall revenue. In the last 12 months, IBM’s Strategic Imperatives, which comprises investments in cloud, analytics, mobile, social, and security technologies, has garnered $32.0 billion in revenue, which is about 40.0% of IBM’s overall revenue.

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The above chart shows that, in the next computing cycle, the TAM (total addressable market) is expected to encompass approximately $13 trillion. Commenting on the investment that is expected to be dominant in 2017, Barron’s columnist Tiernan Ray cites Morgan Stanley (MS) hardware analyst Katy Huberty, who stated that “cloud adoption is inflecting higher and we see whitebox maker Quanta, and companies that can move up-the-stack, like IBM, as beneficiaries.”

What will drive the next computing cycle

SMAC (social, mobile, analytics and cloud) technologies have engulfed the IT (information technology) environment. After SMAC, VR (virtual reality), AR (augmented reality), the IoT (Internet of Things), AI (artificial intelligence), machine learning, and autonomous vehicles are the key areas that are expected to drive the $13 trillion in spending forecast during the next computing cycle.

In 2016, the major acquisitions announced by Microsoft (MSFT), IBM (IBM), Google (GOOG) and Salesforce (CRM) have hovered around at least one of these themes. Commenting further on the new computing cycle, Huberty stated that “every 10 years a new computing cycle emerges that is 10 times the size of prior cycle.” History shows that PCs (personal computers) ruled the 1980s, the Internet dominated the 90s, and now the smartphone has captivated the world of computing. Huberty added, “To remain on the historical path, the next computing cycle must drive tens of billions of units, well above global population of 7 billion.”


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