IBM Cloud Computing Revenue Surpasses $1B in Q3 2013

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IBM announced on Wednesday that its revenues for the third quarter was down 4 percent from Q3 2012 at $23.7 billion.

IBM’s hardware division, which makes up around 16 percent of its total revenues, was hit the hardest. The Systems and Technology division, which makes server and storage hardware, saw a decline of 16.6 percent year-over-year to $3.2 billion, according to a report by InformationWeek.

Mark Loughride, IBM CFO, said the company is planning to address revenue decline in its hardware business by moving Power Systems servers into the Linux market, according to the report, in order to offset the slowing demand for Unix servers.

Sales in China were down by 15 percent as 40 percent of total sales in China are attributable to hardware.

While hardware struggled in Q3, cloud revenue surpassed $1 billion in quarterly revenue for the first time ever, which was helped by its acquisition of SoftLayer which closed at the beginning of July. 

IBM lost a $600 million dollar contract from the CIA after a court ruled in favor of Amazon, but it won a $1 billion dollar cloud hosting contract with the US Department of the Interior this August. 

In July, IBM had to cooperate with US regulators in investigation how it reports revenues of its cloud computing business.

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  1. Be prepared for more acquisitions like SoftLayer as IBM looks to maintain revenue. Unfortunately, this strategy all too often leads to a “Franken IT” approach to the cloud, in which newly acquired technology is stapled onto previous solutions, adding new features and functionality in a monstrosity that only grows complexity rather than simpliflying IT. Enterprises seek a Cloud Empowered Enterprise™ that leads to business innovation driven by greater efficiency and agility, not the inverse. For more: - Shawn Douglass, CTO ServiceMesh