IBM Common (NYSE:IBM) felt the full wrath of the market after reporting yet another quarterly revenue decline. The stock fell by as much as 9%, the most in more than 10 months, as the tech giant reported a greater sales to decline in Q4 than the market expected.
Sales Decline
Sales in the quarter fell by as much as 6.5% to $20.4 billion, affirming growing concerns that Chief Executive Officer Arvind Krishna’s turnaround could take more time. The revenue was below $20.75 billion that Wall Street expected and marked the tenth consecutive quarter that big blue had struggled to post year over year increase in sales. In contrast, earnings came in at $2.7 a share above estimates of $1.79 a share.
Another point of concern is the fact that revenue declined across IBM’s major business segments. Cloud and Cognitive software segment posted a 4.5% decline in revenues. Technology services revenue was also down by 5.5% as sales from Global Business Services dropped 2.6%.
In defense of the declines, management has attributed the slowdown to disappointment in software sales caused by uncertainty in the sector owing to COVID-19. IBM continues to see lower than expected demand for transaction processing software mostly used by banks, airlines, and retail players.
Focus On Hybrid Cloud
Likewise, the Chief Executive remains confident of IBM bouncing back to revenue growth as cloud and artificial intelligence takes hold in 2021. IBM is looking to distinguish itself from its peers and accrue a competitive edge by offering a hybrid model in the cloud business.
The company plans to help clients store and computing data across on-premises infrastructure and private cloud services. The transition to the hybrid-cloud market received a boost with Red Hat's acquisition in 2018 for $34 billion. In the most recent quarter, Red hat revenue was up by 19% to $1.3 billion.
Similarly, IBM continues to make acquisitions as it seeks to strengthen its cloud credentials to compete against Amazon and Microsoft's industry leaders. In the recent past, the company has completed close to seven acquisitions, all focused on cloud and Artificial intelligence