IBM Corp.’s share price up, posts a 2% fall in the second-quarter revenue, profit surges

International Business Machines Corp. posted a drop in revenues for the ninth consecutive quarter yesterday, though adding a massive chunk to profits. Long-term outlook was confirmed as positive, with growing focus on the companys cloud computing services.

According to the report, the companys revenue over the second three months of the current fiscal year declined by 2% on an annual basis to $24.4 billion.

Sales of the core hardware products dropped 11% on an annual basis, while sales attributed to the cloud computing services added the massive 50% from a year ago, but still amounted only $2.8 billion. Some analysts, however, pointed that the clouds sales might actually be eating away from the core, hardware business of IBM.

You dont know “how much of that is new wins and how much is cannibalistic,” Amit Daryanani, analyst at RBC Capital Markets, said for Bloomberg, addressing the massive growth in IBMs cloud revenues, in relation with dropping total revenues.

Meanwhile, the net income of the company increased by 28% annually to $4.1 billion, or $4.32 per share, which is in line with IBMs targeted profit. The company also confirmed its forecast of $18 profit per share by years end.

As reported by the Financial Times, the Chairman and Chief Executive Officer of International Business Machines Corp. Ms. Ginni Rometty shared that the company had made “further progress” over the second three months of the financial year. Ms. Rometty also commented that the performance of the company was satisfactory in the cloud computing sector, as well as in big data and analytics, mobile and security.

Ms. Rometty has been driving towards higher profits by disposing of the lower-margin units such as the low-cost server division it sold to Lenovo earlier in 2014, and emphasizing on growing sectors, such as big data analytics and cloud computing.

“It’s become more of a show-me story. It leaves investors to gauge how much faith they have in IBM’s ability to execute. At some point, investors look at the quality of earnings and would like to see business momentum at its core franchises,” Bill Kreher, analyst at Edward Jones & Co., commented for Bloomberg.

International Business Machines Corp. was 0.1% up to close at 192.49 dollars per share yesterday, marking a one-year change of -1.06%. According to information published on CNN Money, the 20 analysts offering 12-month price forecasts for International Business Machines Corp. have a median target of 195.00, with a high estimate of 225.00 and a low estimate of 160.00. The median estimate represents a +1.82% increase from the last price of 192.49.