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IBM revenue falls as weak legacy businesses offset cloud growth

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FILE PHOTO: A man stands near an IBM logo at the Mobile World Congress in Barcelona, Spain, February 25, 2019. REUTERS/Sergio Perez/File Photo

(Reuters) – International Business Machines Corp posted a 4.2% fall in quarterly revenue, in line with analysts’ estimates, as weakness in its legacy businesses of selling hardware and software offset growth in its high-margin cloud computing unit.

The Armonk, New York-based technology services giant, which wrapped up the mega cloud merger with Linux maker Red Hat Inc last week, faced years of revenue declines while it shifted focus to the cloud business, away from established businesses such as mainframe servers.

Revenue from the cloud unit, the faster-growing service and a key metric for the company, grew 5% to $19.50 billion in the trailing 12 months.

Revenue from the cloud and cognitive software segment, which includes analytics, cybersecurity and artificial intelligence, was up 3.2% at $5.65 billion and beat estimates of $5.49 billion, according to 3 analysts polled by Refinitiv IBES.

The company’s net income rose to $2.50 billion, or $2.81 per share, in the second quarter ended June 30, from $2.40 billion, or $2.61 per share, a year earlier.

Total revenue slipped 4.2% to $19.16 billion, in line with analysts’ estimates of $19.16 billion.

Year-to-date the company’s shares rose 26% and closed at $143.09 on Wednesday.

Reporting by Sayanti Chakraborty in Bengaluru

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