Buoyed by Red Hat profits, IBM’s CEO sees ‘progress’ in shift to cloud and AI – WRAL Tech Wire

RESEARCH TRIANGLE PARK IBMs stock may be lagging behind its rivals like Microsoft and Amazon, but its new CEOArvind Krishna contends that he is seeing progress in Big Blues push to cloud and artificial intelligence (AI).

On Monday, the tech giant released its second quarterly earnings the second report since Krishna took over the reigns on April 6 and it was a bit of a mixed bag. Clearly not immune to the pandemic sweeping across the globe, IBM reported adjusted earnings to $2.18 per share, a 31 percent drop. Still, it wasbetter than analysts had expected at around $2.07 per share, according to Refinitiv.

Revenue, meanwhile, declined 5 percent to $18.12 billion, versus $17.72 billion as expected.

It comes at a time when IBM headquartered in Armonk, New York with its largest corporate campuses based in RTP has been slower to recover compared to the broader tech space. Since the markets March 23 lows, IBM is only up 30 percent against its industrys 50 percent climb, notedresearch firm Zacks.

IBM earnings drop 31% in Q2 but beat Street expectations

On the flip side: revenue from the Cloud and Cognitive Software business in the second quarter, which includes Cloud and Data platforms like Red Hat, totaled $6.3 billion, up 3 percent.

Total cloud revenue of $23.5 billion over the last 12 months, is up 20 percent (up 23 percent adjusting for divested businesses and currency) exactly one year since IBM bought the open-source software firm for $34 billion. Raleigh-based Red Hats revenue is up 17 percent.

I believe that our strategic vision is taking hold in the marketplace, Krishna saidin a conference call on Monday afternoon, adding that the coronavirus might have accelerated the adoption of IBMs hybrid cloud platform.

Across the board, we are seeing greater demand for Red Hat products, he added. Clients such as Lafayette, American Express, Vodafones Broadridge Financial Solutions, Banco Sabadell and culture bank, all see the value in a hybrid cloud architecture by IBM and Red Hat.

James Kavanaugh, IBM senior vice president and chief financial officer, also reiterated this point.

With Red Hat, we are positioned to win the hybrid cloud architectural battle, he said on the same conference call. We now have over 2400 clients using our container solutions, and nearly 600 IBM services clients, utilizing Red Hat technology.

Still, it hasnt come without some major growing pains and restructuring. As Krishna acknowledged, IBM has been doing a lot of work on the back end to bring its portfolio together in a more cohesive fashion.

That included a massive round of layoffs said to be in the thousands in May. Krishna didnt confirm the figure, but noted that IBM had moved to simplify its team.

He added that IBM isfocused on changing our culture and operating model, so we can make decisions more quickly. Other recent moves involved acquiring Brazils WDG Automation to boost its AI-infused capabilities and US-basedSpanugo for its cloud cybersecurity needs.

Some analysts believe its paying off.

A year into becoming part of IBM, Red Hat has not disappointed and is a major component of the new and diversified life that has been breathed into the IBM portfolio, said saidNicki Catchpole, senior analyst at TBR Cloud and Software.

The continued integration of Red Hats open, flexible and automated solutions coupled with a concerted push to augment and expand upon ML and AI use cases complements IBMs strategic imperative to usher in what has been dubbed Chapter 2 of the Cloud.

AnalystHaris Anwar also remained optimistic.

During the past decade when it came to growth, IBM undeniably disappointed investors, he wrote on Investing.com. But after the Red Hat acquisition, and with new management in place, we see IBM getting back to a growth path once the pandemic is behind us.

IBMs healthy balance sheet, manageable debt and its juicy 5.2 percent dividend yield that pays $6.52 annually, makes the stock attractive for income-oriented investors.

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Buoyed by Red Hat profits, IBM's CEO sees 'progress' in shift to cloud and AI - WRAL Tech Wire