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How IBM’s Strategic Imperatives Lost Its Sheen in Fiscal 2Q17

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Growth slowing down in Strategic Imperatives

In the past, International Business Machines’ (IBM) Strategic Imperatives segment was the company’s silver lining amid its consistent fall in total revenues and the lack of growth across its operating segments. IBM’s investments in SMAC (security, mobile, analytics, and cloud) and security technologies are part of its Strategic Imperatives segment.

The segment’s revenues rose 7% on a constant currency basis to $8.8 billion in 2Q17. By comparison, this segment reported growth of 13% and 12% in fiscal 1Q17 and fiscal 2Q16, respectively.
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In the past 12 months, the segment’s revenue has grown to $34.1 billion, contributing ~43.0% of the company’s overall revenues. IBM has already met its previous guidance, wherein the company said that Strategic Imperatives will account for 40.0% of its business by the end of 2018. The Strategic Imperatives segment seems well on the way to be worth ~$40.0 billion by the end of 2018.

Notably, fiscal 2Q17 marked the company’s 21st consecutive quarter of no revenue growth. Though IBM has ensured that the Strategic Imperatives segment continues to grow, this segment has been unable to offset the decline in company’s legacy offerings.

Despite the strong likelihood of meeting guidance for growth and contributions to overall revenues, the slowing growth in this segment can’t be overlooked—especially when the company’s legacy businesses are sliding.

Cloud ruled the Strategic Imperatives segment

Within this segment, cloud continued to be the highlight. Within IBM’s Strategic Imperatives segment, security—the largest contributor to Strategic Imperatives—and analytics each grew 4%, while mobile continued to report a double-digit growth rate. Mobile registered growth of 27%, while Cloud revenues grew 15% to $3.9 billion.

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