IBM highlights cloud sales in mixed Q1 results

IBM posted cloud sales of $19.5 billion over the last 12 months, which was an increase of 10% year over year. (Pixabay)

While IBM reported a mixed bag of first-quarter results Tuesday afternoon, its cloud sales were a bright spot.

IBM posted cloud sales of $19.5 billion over the last 12 months, which was an increase of 10% year over year. IBM's cloud growth in the first quarter accelerated to 12%, with its as-a-service offerings up 15%.

On a conference call Tuesday afternoon, Jim Kavanaugh, IBM's senior vice president and chief financial officer, said that IBM reorganized its portfolio to better help customers migrate to hybrid clouds, according to a Seeking Alpha transcript.

IBM realigned its reporting structure for the first quarter by creating "Cloud & Cognitive Software" and "Global Technology Services" segments while dropping its "Technology Services & Cloud Platforms" segment. The reorganization "better aligned our portfolio to the market and to underlying business models," according to Kavanaugh. It also better aligns IBM with Red Hat once its $34 billion deal to buy the open source vendor closes in the second half of this year.

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"As our clients become digital enterprises, they need tighter integration between hybrid cloud and their data and AI platforms to unlock value," Kavanaugh said. "And so we recently made changes to our management system to more effectively address our clients' evolving needs and in preparation for the acquisition of Red Hat."

On the conference call, Kavanaugh spoke about how IBM has invested in adding capabilities across IBM Cloud, IBM Private Cloud for data and an IBM Muliticloud Manager.

"Over the last several months, we've talked about the next chapter of cloud, which focuses on shifting mission critical work to the cloud and optimizing everything from supply chain to core banking systems," he said. "To address this opportunity, enterprises need to be able to move and manage data, services and workflows across multiple cloud and on-prem. And they need to be able to address security concerns, data protection and protocols, availability and cloud management. This requires a hybrid multicloud open approach."

The Cloud & Cognitive Software segment is comprised of IBM's cloud and data platforms, cognitive applications and transaction processing platforms. That segment brought in revenues of $5 billion, which was down 1.5%.

The Global Technology Services segment, which is the biggest segment in the reporting structure, posted revenue of $6.88 billion, which was down 7% year over year. Global Technology Services includes infrastructure and cloud services and technology support services.

Revenues across all of IBM’s other business units either fell or were largely flat.

Overall, IBM's revenue was down close to 5% from the same quarter a year ago, which marked the third straight quarter of declining revenue year over year. IBM reported revenue of $18.2 billion, which missed Wall Street analysts' projections of $18.46 billion. IBM's non-GAAP earnings per share was $2.25, compared to $2.22 per share expected by analysts. 

IBM reiterated its 2019 adjusted operating profit of "at least" $13.90 per share, while analysts were expecting $13.91 per share.