IBM (NYSE:IBM) is to announce third quarter earnings on the 16th of October. There was a marginal decline in the company’s revenue in Q2 of 2014. This was because of currency issues and customer care divestment. The decline increased with weak performance with the company’s storage and server division.
IBM’s (NYSE:IBM) revenue dropped by 2% in Q2 on a year by year basis and made it to the amount of $24.4 billion. Even with all this happening, the company saw a rise of 28% in the net income making it to $4.1 billion due to the earnings that came a year ago from rebalancing of the workforce.
Not only did its software business see low digit growth but its Global Technology Services revenue also took a hit. However, it was due to the cloud computing and the analytics initiatives that the company stayed afloat with revenues increasing by 2% over a yearly basis making it to $4.5 billion in the second quarter.
It is expected that the company will continue to show increases in revenue for its software segment as well as its GBS division in the next quarter. The IT spending trends indicate that they will grow but at a decreasing pace. Growth will mostly come from larger developed countries as it has previously.
Order backlog must improve as it is one of the main revenue boosters. GTS revenues aren’t doing so well which have declined quite a bit as a result of contract restructuring as well as pricing pressure. The operating systems and the Middleware have always been the biggest contributors to the company’s stock.
They make up around 47% in total with good earnings to continue being reported in the future. The demand for enterprise software is pretty good in the market as they are being catered to the growing markets which include social, security and mobile tools. The GTS services of IBM (NYSE:IBM) make up around 21% of its stock.
The revenues from this division have declined over the years. Outsourcing revenues are being impacted because of the discretionary IT spending which is likely to show decreased revenues however, it is certain that contract restructuring will bring in higher profit margins in the third quarter.
IBM’s (NYSE:IBM) GBS division makes around 11% of the company’s stock value. There was a 2% increase in GBS in the second quarter of 2014 on year by year basis with the increase in revenue coming to $4.5 billion. IBM (NYSE:IBM) announced that it was to sell its x86 server business in Q1 to Lenovo.
This division caters to the rack server and blade market which currently has an overflow of tough competition. The rest of the server business, the z-systems mainframes, computing platforms and power line are facing issues. Mainframes are declining in the product life cycle while power systems are witnessing disruptions. This division needs improvement that will help set it aside from competition and bring it up to a shape where it defies all odds and brings in revenue.