Computing and IT services giant IBM will spend $4 billion on its cloud services, data analytics and mobile businesses in a bid to turn it into what CEO Ginni Rometty said will be a $40-billion-a-year-in-revenue business by 2018.
On a conference call ahead of its annual investors presentation in New York, Rometty said the three businesses, which she referred to as IBM’s “strategic imperatives,” have grown in overall importance as it has divested itself of its older traditional business units. Five years ago the divisions amounted to 13 percent of IBM’s sales, Rometty said. By the start of 2015 they accounted for 27 percent.
IBM’s sales declined last year to $93 billion from about $100 billion the year before in part because of slowdowns in some of its traditional computing hardware and software businesses, but also because it has been selling off business units. In 2014 it sold a server business unit to Lenovo and its chip-manufacturing assets to GlobalFoundries.
“Much of the decline in revenue has been engineered by us,” Rometty said. “We restructured the hardware business and it is now less than 10 percent of the company, and we returned that business to profitability.”
Now the plan, she said, is to invest heavily in the three strategic imperatives. When it last reported earnings, IBM said these three businesses grew by 16 percent year on year, but even in growing, they weren’t big enough to move the needle on IBM’s overall results.
Rometty hopes to change that and did what IBM CEOs before her have always done: She set a goal. Investing in the strategic imperatives now — cloud, analytics, mobility and security — should push them to grow to $40 billion or about 40 percent of sales by 2018, she said.
Last year Rometty abandoned a goal initially set by her predecessor Sam Palmisano to deliver earnings of $20 per share this year.
IBM has been particularly aggressive in the cloud computing business. After spending $2 billion to buy SoftLayer, its combined cloud services and applications business is now worth about $7 billion in annual revenue, having grown 60 percent in 2014. It has been investing heavily in building up data center capacity and beefing up the units’ capabilities, including a deal to run SAP applications on SoftLayer.
Rometty said IBM will also do more partnerships with other companies similar to deals announced last year with Apple to jointly sell and develop mobile software, and a deal announced earlier this month with SoftBank to bring the Watson cognitive computing system to Japan.
The result, she said, will be “IBM reinvented again.”
This article originally appeared on Recode.net.
