IBM pivoted in 2013 to meet new technology trends — focusing more on cloud computing and big data and less on hardware, chief executive and chairman Ginni Rometty wrote to investors in an annual report.
For instance, the company announced in January an agreement to sell part of its Intel-based server business to Lenovo; IBM’s cloud business grew almost 70 percent in 2013, generating more than $4 billion in revenue. Over the past few years IBM has invested more than $24 billion in big data and analytics, including the cost of more than 30 acquisitions, according to the report. At the beginning of 2014, IBM created the IBM Watson Group — dedicated to the cognitive computing system that won Jeopardy! in 2011— and supported it with a $1 billion investment.
“This divestiture [of the sever business] is consistent with our continuing strategy of exiting lower-margin businesses, such as PCs, hard-disk drives and retail store solutions,” Rometty wrote, noting that the company will continue to invest in research and development for semiconductor technology.
“[W]e must acknowledge that while 2013 was an important year of transformation, our performance did not meet our expectations,” she wrote.
Rometty’s comments were likely reassuring to investors, Morningstar analyst Peter Wahlstrom said.
“That was encouraging for them to say, effectively, ‘we’re willing to walk away from unprofitable businesses.’ ”
Wahlstrom said Rometty’s shift to focus on cloud, social and mobile computing is consistent with the company’s strategy over the past two decades, over which IBM has sold both its printing and personal computing divisions.
“They’re the 800-pound gorilla. They’ve got a lot of financial resources, they’re different [from competitors] in that they don’t necessary have to acquire business and talent. They’ve got a huge R&D budget, a huge patent portfolio.”
Despite falling short of its own expectations,IBM’s “gross margin has improved for 10 consecutive years, and that’s still impressive,” Wahlstrom said.