IBM wants cloud killing

Clouds in Oxford: pic Mike MageeBig Blue thinks it can restore itself to its former suited glory by pushing heavily into cloud and big data.

Apparently the outfit has set itself a target of making $40 billion a year from cloud, big data, security and other growth areas by 2018.

The target was mentioned at the company’s annual investor meeting in New York yesterday and is the first hint of a serious “cunning plan” since IBM moved away from its previous strongholds in hardware and servers.

The $40 billion will come from areas which IBM calls its “strategic imperatives,” namely cloud, analytics, mobile, social and security software.

That would represent about 44 percent of $90 billion in total revenue that analysts expect from IBM in 2018.

Those businesses generated $25 billion in revenue for IBM last year, or 27 percent of its total $93 billion in sales.

The company said it would shift $4 billion in spending to its “strategic imperatives” this year.

Revenue at IBM has gradually shrunk over the past three years as it sold off its unprofitable units in businesses such as low-end servers, semiconductors and cash registers.

IBM Chief Executive Virginia Rometty has said she was happy to jettison revenue from such unprofitable businesses, which she dubs “empty calories.” Although we would have thought that empty calories would be a good thing, because they would fill you up without meaning you put on weight.

IBM revenue has now fallen for the past 11 quarters, while earnings growth has been sporadic.

The company says its long-term plan is to hit “low single-digit” revenue growth and “high single-digit” growth in operating earnings per share. Last year IBM withdrew its long-term plan to hit $20 per share in operating earnings for 2015.

Things have not been going that well for IBM of late. It gets more than half of its cash from foreign parts, and the strong US dollar has hurt its sales by more than six per cent this year.