IBM sets sights on restoring hardware unit after Q4 slump

IBM's new businesses aren't growing fast enough to offset its hardware unit, but the firm's chief executive is betting on China as a major growth opportunity.
Written by Zack Whittaker, Contributor
Image via CNET

IBM says its hardware unit will grow in 2015 as the company continues to invest in research and development, while spinning out its poor performing businesses.

It comes at a time when IBM's fiscal first quarter revenue took a hit after its hardware unit was slammed for two quarters in a row — particularly in System z mainframes, Power Systems, and storage — down 23 percent year-over-year.

But chief executive Ginni Rometty said at the company's investors' event on Wednesday that growth remains positive in Latin America, the Middle East and Africa, despite falling revenue in China.

"We move on and we spread ourselves out, more industries, more clients, cloud, data, et cetera, around there," Rometty said, according to the Reuters news agency. Chief financial officer Martin Schroeter said in order to balance out the hardware declines, the company's research and development investments would increase.

IBM spent $133 billion on research and development in the last decade, Rometty said in an interview with CNBC's David Faber ahead of the Wednesday meeting.

In the interview, the chief executive reiterated that for IBM, the growth markets in the long-run are "absolutely the right investment," including China, despite its heavy hardware portfolio in the world's largest country by population. 

However, the company's BRIC (Brazil, Russia, India, and China) markets saw an 11 percent decline in revenue in the first quarter.

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