IBM fourth-quarter results show hybrid refocus

IBM has reported a 6.5% increase in revenue for the fourth quarter of 2021 to $16.bn. The company posted revenue of $6.2bn from hybrid cloud, an increase of 16%, while software revenue was up by 8% compared with the same quarter in the previous year.

Consulting revenue grew by 13%. IBM’s infrastructure business experienced flat growth, but its transaction processing business saw 11% growth.

IBM has been working on repositioning and refocusing itself following its $34bn acquisition of Red Hat. The company completed the separation of its Global Technology Services (GTS) into Kyndryl, which has been operating as a separate publicly traded company since November 2021.

Earlier this month, it announced it would be selling off its Watson Healthcare artificial intelligence (AI) business to investment firm Francisco Partners. The sale includes IBM’s Health Insights, MarketScan, Clinical Development, Social Program Management, Micromedex and imaging software offerings.

Tom Rosamilia, senior vice-president, IBM Software, said the deal with Francisco Partners demonstrates how the company is becoming more focused on its platform-based hybrid cloud and AI strategy. According to its Q4 2021 results, IBM saw 7% growth in its hybrid cloud business. Red Hat posted an increase of 19% and Automation grew by 13%, but its Data and AI business grew by only 1%, and the security part of its hybrid platform business shrank by 2%.

According to a transcript of the earnings call for Q4 2021, posted on the Seeking Alpha financial site, IBM CEO and chairman Arvind Krishna said: “Everyone is looking on how do you deploy technologies, be it Salesforce, Adobe, cloud technologies, to go improve their processes. It’s actually the conversation that has changed from three years ago. It’s not about cost savings. It’s actually much more about how can you deploy these technologies to improve a process.”

For instance, Krishna said IBM’s customers were looking at how they achieve omnichannel and multichannel, provide greater resilience in their supply chains and use warehouses and stores as a point of delivery both for in-person shoppers and e-commerce customers.

Krishna said he believed bots or “digital workers” are key to helping businesses solve these problems and help organisations tackle long-standing tech skills shortages. This is where IBM sees a role for its consulting business. This business unit, which includes business transformation, technology consulting and application operations, posted revenues of $4.7bn, up by 13.1% from the equivalent quarter last year.

IBM reported that the largest increase in its consulting business was in the hybrid cloud segment, which saw a revenue rise of 31%. Business transformation consulting business saw growth of 18%, technology consulting grew by 14% and application operations by 6%.

Discussing the Q4 2021 results, James Kavanaugh, IBM senior vice-president and chief financial officer, said: “In 2021, we continued to invest for the future by increasing R&D spending, expanding our ecosystem and acquiring 15 companies to strengthen our hybrid cloud. With the separation of Kyndryl, we have now taken the next step in the evolution of our strategy, creating value through focus and strengthening our financial profile.”