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Strategic Imperatives Could Hog the Limelight in IBM’s 2Q Results



Strategic Imperatives is IBM’s silver lining

In the previous part of this series, we looked at analysts’ expectations for IBM’s (IBM) fiscal 2Q17 results. The Strategic Imperatives segment seem to be IBM’s silver lining amid its fall in total revenue and the lack of growth in its operating segments. Strategic Imperatives encompasses IBM’s investments in SMAC (social, mobile, analytics, and cloud) and security technologies.

The Strategic Imperatives segment’s revenue rose 13% to $7.8 billion in fiscal 1Q17. In the quarter, it contributed 43.0% of IBM’s overall revenue, a significant improvement from the previous year, when it contributed 37%.

In the last 12 months, the segment’s revenue has grown to $34 billion, contributing ~42.0% of the company’s overall revenue. The company seems well on the way to meeting its guidance of Strategic Imperatives accounting for 40.0% of its business and being worth ~$40.0 billion by the end of 2018.
Strategic imperatives

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The cloud’s contribution to 2018 expectations

IBM’s cloud business grew thanks to the 60% growth seen by its cloud service. With an annual run rate of $8.6 billion in 1Q17, IBM’s cloud business has generated $14.5 billion in revenue in the last 12 months.

However, despite all this growth, we should keep in mind that fiscal 1Q17 marked the company’s 20th consecutive quarter of no revenue growth. To offset the consistent revenue decline in its legacy offerings, IBM has to ensure that the Strategic Imperatives segment continues to record consistent growth. It is very likely that this segment will post double-digit growth in the soon-to-be-announced fiscal 2Q17 results. Next, we’ll discuss IBM’s competitive positioning in the cloud.


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