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By | Neil McAllister 26th February 2015 23:57

If in doubt, blow $4bn: IBM says it will fatten up on cloud, mobile, Big Data cake by 2018

Ginni eyes $40bn-a-year sales

IBM is betting billions that it can claw its way back to growth by focusing on what it calls its "strategic imperatives," including cloud, data analytics, mobility, social networking, and security.

During Big Blue's annual meeting with financial analysts on Thursday, CFO Martin Schroeter said IBM plans to shift $4bn of spending toward these hot-button areas in 2015.

The goal of the investment, he said, is to grow the segments to $40bn in annual revenue by 2018.

IBM doesn't break out its strategic imperative segments in its formal financial reporting, but during Thursday's meeting, Schroeter said they accounted for roughly $25bn worth of revenue during 2014, or 27 per cent of the total.

That means the firm will need to increase its total annual revenues by 16 per cent over the next three years if it is to meet CEO Ginni Rometty's ambitious target.

It's a tall order. IBM's total revenues for its fiscal 2014, which ended on December 31, were $92.8bn, which was 6 per cent less than it earned the previous year. Its net income for the year, meanwhile, fell 27 per cent, to $12bn.

And that wasn't just a bad year. Big Blue has reported year-on-year revenue declines for the past 11 successive quarters. It hasn't seen any actual growth since 2011.

Yet hope springs eternal, and IBM says it has good reason to believe that its new darling business areas can plump its bottom line, given a little investment.

For example, Schroeter said revenues from IBM's public, private, and hybrid cloud offerings in 2014 were $7bn, a 60 per cent increase over the previous year.

Similarly, the company's "engagement initiatives" – which include mobility, social, and security software and services – saw greater than 35 per cent year-on-year growth, with 2014 revenues of nearly $4bn.

Whether IBM can transform these segments into key drivers of its business, however, is unclear. If the company meets Rometty's $40bn goal, the strategic imperatives will be responsible for more than 40 per cent of its overall revenues.

Investors seemed little moved by IBM's promises and the company's share price dipped by 2 per cent on the news, only to partially recover in after-hours trading. ®

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