IBM CFO: Company Made Strides in Blockchain, Cloud, Security in Q3 (MESA)

IBM continued to make strides with its blockchain and other cloud initiatives, as well as with its cybersecurity business, in the third quarter (ended Sept. 30), according to CFO Martin Schroeter. Across the company’s business segments, revenue from its “strategic imperatives” areas grew 11% from a year ago and 10% on a constant currency basis, with “strong double-digit growth in cloud and security,” he said Oct. 17 on a conference call with analysts. In addition to cloud and security, IBM’s growing strategic imperative businesses include analytics and mobile initiatives.

Revenue from IBM’s strategic imperatives over the past 12 months also grew 10%, to $34.9 billion, and now represents 45% of IBM’s total revenue, he told analysts. IBM is “embedding cloud and cognitive capabilities across our business, and our strategic imperatives, as we’ve said, are a signpost of the progress we’re making in helping our enterprise clients to extract value from data, and become digital businesses,” he said.

Third-quarter IBM cloud revenue jumped 20% from a year ago and has grown to a $15.8 billion revenue base over the past 12 months, which he said represented 20% of company revenue.

In security, IBM recently embedded cognitive functionality into many of its offerings, he told analysts. Across all its segments, security grew about 50% in the third quarter, “driven by” security software solutions and “strong demand for the pervasive encryption capabilities” of its new z14 mainframe, he said.

Also in the third quarter, IBM “continued to launch new blockchain partnerships and networks, including an initiative with a group of leading food retailers and suppliers” that he noted included Walmart, Kroger, Dole, Nestle and Unilever to address food safety. IBM is also partnering with UBS and several global banks to build a blockchain-based platform to support trade finance, he pointed out.

During the third quarter, IBM also formed a new partnership with MIT to create the MITWatson artificial intelligence (AI) lab, he said, adding the plan is to “mobilize the talent of more than 100 AI scientists, professors and students to advance AI hardware, software and algorithms, and increase AI’s impact on industries and enterprises.”

IBM cognitive solutions revenue inched up 3% in Q3, according to IBM. Growth in that area is being “driven by organic performance, as we’ve wrapped on most of our acquisitions,” he said. But IBM continues to “invest to combine organic and acquired content to build cloud-based cognitive offerings,” he said.

In analytics, IBM saw “strong growth again this quarter” in Watson, its enterprise AI platform, he went on to say, adding that it’s not just IBM clients that are benefiting from its cognitive solutions, but also IBM itself. IBM’s client support teams use Watson to “help drastically reduce response time on more than three-and-a-half million service requests per year,” he said, adding Watson is trained on 7,000 IBM products and “provides instant resolutions, based on what it has learned from previous similar requests.” Watson contributed to a 30% reduction in problem determination time across IBM’s Technical Support Services business, he said.

IBM is also embedding cognitive into its security offerings, he noted, saying security software grew by “double digits” in Q3, calling that a “hot market for us.”

Total IBM Q3 revenue was about flat, at $19.2 billion, while profit dipped to $2.7 billion from $2.9 billion. But shares in the company were trading 9.2% higher at $159.99 in morning trading Oct. 18.