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How IBM’s Global Technology Services Performed in 2Q17

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Strategic Imperatives growth, despite challenges

In 2Q17, International Business Machines’ (IBM) technology services and cloud platform businesses were a part of the company’s GTS (Global Technology Services) segment. The segment also includes IBM’s cloud infrastructure and platform capabilities.

This segment contributed ~44% of IBM’s overall revenues in 2Q17, falling 5.1% to ~$8.41 billion. Its revenues fell short of the analysts’ expectation of $8.58 billion, but Strategic Imperatives and the cloud continued to grow—by 22% and 21%, respectively.

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Significant deals signed in the GTS segment

In 1Q17, IBM closed a new $700-million, six-year cloud agreement with Bombardier. IBM noted the following: “We’ll move them to the IBM Cloud and help integrate their operations globally.”

IBM signed another cloud agreement worth around $1.5 billion with Lloyds last quarter.

In 1Q17, IBM announced the acquisition of Verizon’s Communications’ (VZ) cloud and managed hosting operations, in a deal that is expected to close later this year. This acquisition is expected to be significantly accretive to IBM’s cloud as it should not only strengthen its customer base by 700 but also lead to the expansion of its global footprint.

War in the cloud

In fiscal 2016, IBM’s cloud services revenue grew 35% to $13.7 billion. With its flailing legacy businesses, IBM has been forced to shift its focus to Strategic Imperatives, of which cloud is an integral component.

Meanwhile, war is raging in the ultra competitive cloud space, wherein Amazon (AMZN) and Microsoft (MSFT) currently have the largest market shares.

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