IBM faces 'rocky time,' but transformation holds the key: CEO

Summary:IBM CEO Virginia Rometty has spoken frankly about IBM's business woes, but insists that change will lift the company from stagnation.

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IBM is facing a "rocky time" in raising revenue and moving in to new growth areas, but transformation will secure the firm's future success, according to the company's CEO.

Big Blue's CEO Virginia Rometty told the New York Times that while decreasing demand for hardware and increased competition have threatened the company with stagnation and falling revenue, the company is seeking avenues of new growth. Rometty, who took the helm almost three years ago, inherited the challenge of boosting the firm's profitability margins, which have taken a dive as hardware and software demand gave way to cloud computing and online data-driven technology advances.

Last month, IBM reported  quarterly revenue  which revealed that software alone is making the tech giant profit. Big Blue reported first quarter earnings of $2.4 billion, or $2.29 a share, down 21 percent year-on-year. First quarter sales were $22.5 billion, down four percent based on 2013 results.

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Poor consumer demand and low profit margins have concerned investors, leading Rometty to insist that while IBM is enduring a "rocky time," the firm's management "are transforming this company for the next decade."

"That is not a one-year job," Rometty said. "Not when you’re a hundred billion-dollar company."

IBM has already made a number of changes to streamline operations and remove less profitable sectors from its portfolio. In recent times, the firm has sold off not only personal computer and storage disk-drive divisions, but also allowed Lenovo to purchase its x86 server business for $2.3 billion. According to the IBM executive, the company has also dedicated resources and time in new fields, including Big Data and cloud-style computing where both processing and software are delivered across the Web.

Rometty says that cloud computing can be "converted to an opportunity" to secure the company's future profitability.

While IBM has already signalled a shift to cloud computing through the purchase of cloud start-up SoftLayer for $2 billion last year and the pledge to invest $1.2 billion in cloud-dedicated data centers , the company faces stiff competition from established players in the industry including Amazon, Google, Microsoft, and Salesforce. IBM's cloud business grew by 69 percent last year, but most of its profit was derived from private clouds. If it plans to enter the public cloud domain, then IBM will have to pull something special out of the hat to compete with the dominant market leader, Amazon Web Services.

"I feel very good about the direction and how we’ve crystallized it," Rometty told the publication "We are making progress, and we just need to keep moving with speed."

Topics: IBM

About

Charlie Osborne, a medical anthropologist who studied at the University of Kent, UK, is a journalist, freelance photographer and former teacher. She has spent years travelling and working across Europe and the Middle East as a teacher, and has been involved in the running of businesses ranging from media and events to B2B sales. Charli... Full Bio

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