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Despite cloud and mobile push, IBM's Q2 revenue flattens

Profit jumps compared to a year ago, when the company took a restructuring charge

By Joab Jackson
July 17, 2014 06:24 PM ET

IDG News Service - Despite a hearty push into cloud services and enterprise mobility, IBM continues to experience difficulty in raising revenue, though second-quarter profit jumped compared to a year ago.

IBM's second-quarter revenue was $24.4 billion, down 2 percent compared with $24.9 billion in the second quarter of 2013, the company announced Thursday.

Despite sluggish revenue, the company did make headway in increasing profit, which was up 28 percent year over year, to $4.1 billion.

Part of the bump comes from comparing the profit from last year, which was abnormally low due to a billion-dollar charge the company took for workforce rebalancing.

"Last year's profit base was lower due to a workforce rebalancing charge of about a billion dollars," said Martin Schroeder, IBM chief financial officer, in a conference call with investors. IBM also worked to trim costs and improve efficiencies this quarter, which also helped the bottom line.

"We are continuing to drive double-digit growth in the parts of our business that address emerging trends in enterprise IT," Schroeder said. "While some of these actions impact our earnings in the short term, they position our business for long-term growth."

The weak second-quarter revenue was similar to the first quarter of 2014, when the company's hardware revenue dipped by 21 percent.

IBM executives describe the company as being in a transition period. As a result, IBM expects revenue growth to be non-stellar as it moves to incorporate new technologies and services into its portfolio.

"In the second quarter, we made further progress on our transformation. We performed well in our strategic imperatives around cloud, big data and analytics, security and mobile," said Ginni Rometty, IBM chairman, president and CEO, in a statement.

"We will continue to extend and leverage our unique strengths to address the emerging trends in enterprise IT and transform our business, positioning ourselves for growth over the long term," Rometty said.

The company noted, without giving specific numbers, that cloud revenue has been up more than 50 percent for the year. Business analytics also grew by 7 percent, mobile revenue by 100 percent and security revenue by 20 percent, all year to date.

Revenue from IBM's Systems and Technology hardware segment was $3.3 billion, down 11 percent from the second quarter in 2013.

Revenue from the IBM services division was $13.9 billion for the quarter, down 1 percent from the same quarter a year before. The Global Technology Services segment turned in $9.4 billion, down 1 percent from the same time a year ago.

Revenue from the Global Business Services segment modified slightly, down 2 percent to $4.5 billion for the second quarter, which ended June 30.

Reprinted with permission from Story copyright 2014 International Data Group. All rights reserved.
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