IBM growth drought continues but UK sales up

UK defied wider EMEA picture as Big Blue recorded 13th consecutive quarterly drop in revenues

IBM's UK business grew in Q1, its chief financial officer revealed as he talked through a set of results that showed revenues falling for a 13th consecutive quarter.

Big Blue's share price fell five per cent last night as it reported a 12 per cent annual drop in revenues for the three months to 30 June, with software down eight per cent, services down 12.2 per cent and hardware down 23 per cent.

The New York-listed giant's top line has been shrinking for more than three years as it shifts its business to "strategic imperatives" such as cloud, big data and security and divests non-core businesses, such as the System x business it sold to Lenovo last January.

Stripping out these divestments and the eight-point impact of currency translations, sales were actually flat at $19.6bn (£12.6bn), IBM pointed out. Cloud was up more than 75 per cent, analytics 20 per cent and social 40 per cent, it said, and cloud revenues now total $7.7bn on a trailing 12-month basis.

"At the risk of oversimplifying this quarter's revenue dynamics, our strategic imperatives were up over 30 per cent, which is 10 points faster than last year," said IBM chief financial officer Martin Schroeter.

"And bear in mind we have a pretty substantial business in cloud and analytics alone, so it's on a big base."

While Q1 sales in the Americas slipped three per cent to $9.3bn, EMEA sales nosedived 19 per cent to $6.1bn. Adjusting for divestments and currency effects, Americas sales rose two per cent and EMEA sales fell two per cent.

But within Europe, the performance was mixed, Shroeter indicated on the earnings call, a transcript of which can be found here, with growth in the UK and declines in Germany and France.

IBM's total net earnings in the quarter fell five per cent year on year to $2.4bn.

Looking at IBM's performance with currency effects and divestments stripped out, Global Services and IBM Software both saw revenues slip two per cent, to $12.2bn and $5.2bn, respectively. Shorn of System x, IBM's hardware business actually rose 30 per cent allowing for currency effects and divestments, as sales of its System z mainframes more than doubled.

Shroeter claimed it had been a "good start to the year".

"We've been very clear that we're transforming our business, and we continue to see signs that the transformation is working," he said.