IBM on Monday reported a mixed second quarter as revenue fell short of expectations, but earnings were better than expected. Big Blue's growth businesses such as cloud and analytics showed strong revenue gains compared to a year ago.
Big Blue reported second quarter earnings of $3.5 billion, or $3.58 a share, on revenue of $20.8 billion, down 13 percent from a year ago. Adjusting for currency and the server business sold to Lenovo, IBM's sales were down 1 percent.
IBM's non-GAAP earnings were $3.84 a share in the second quarter. Wall Street was looking for non-GAAP earnings of $3.78 a share on revenue of $20.95 billion.
As for the outlook, IBM maintained that it will deliver annual non-GAAP earnings between $15.75 to $16.50 a share.
The trick with IBM is determining the inflection point when its growth businesses will outgrow the decline in established units with slow growth. IBM has ditched its System x business and recorded a loss for its discontinued microelectronics business.
IBM's quarter had the typical moving parts. Here's a look:
The company's cloud, analytics and engagement units delivered growth of 20 percent.
Cloud revenue was up more than 50 percent. IBM counts a mix of hardware and services as cloud revenue. IBM's as-a-service revenue is on a $4.5 billion annual run rate.
Revenue from analytics was up more than 10 percent in the second quarter.
By region, IBM saw Americas revenue fall 8 percent from a year ago with sales from Europe/Middle East/Africa falling 17 percent. Asia Pacific sales were down 19 percent. Revenue from Brazil, Russia, India and China (BRIC) fell 35 percent. In all regions, the stronger dollar hurt sales.
Technology services revenue fell 10 percent and business services slid 12 percent in the second quarter. These businesses were down 1 percent and 3 percent, respectively, in constant currency.
Software revenue fell 10 percent.
Hardware sales fell 32 percent in the quarter, largely due to the divested commodity server business. On the bright side, revenue from IBM's new mainframe was up 9 percent from a year ago.