Arvind Krishna, chief executive officer of International Business Machines Corporation (IBM), during a television interview in San Francisco, California, July 13, 2022.
David Paul Morris | Bloomberg | Getty Images
IBM shares slid as much as 4% in extended trading on Monday after the company trimmed its 2022 cash forecast. It still beat on the top and bottom lines.
Here's how the company did:
- Earnings: $2.31 per share, adjusted, vs. $2.27 per share as expected by analysts, according to Refinitiv.
- Revenue: $15.54 billion, vs. $15.18 billion as expected by analysts, according to Refinitiv.
IBM's revenue rose 9% year over year in the quarter, according to a statement. Income from continuing operations increased to $1.47 billion from $810 million in the year-ago quarter. IBM spun off its managed infrastructure services business into publicly traded Kyndryl in November, and sales to Kyndryl boosted IBM's revenue.
"We're planning for about five to six points of revenue growth from the sales to Kyndryl in 2022," Jim Kavanaugh, IBM's finance chief, said on a conference call with analysts.
Management called for $10 billion in free cash flow for all of 2022, down from the range of $10 billion to $10.5 billion that it provided in April. Kavanaugh blamed the strong dollar and the suspension of business in Russia.
"That was a very highly-profitable business for us and that's going to cost a couple hundred million dollars worth of free cash flow and profit by the way in 2022," he said.
Executives reiterated their plan for constant-currency revenue growth at the high end of their mid-single-digit model for the year. Currency negatively impacted reported revenue by over 6% of growth, or $900 million, which was $200 more than spot rates had indicated three months ago, Kavanaugh said.
IBM reported $6.17 billion in software revenue in the second quarter, up 6% but below the $6.3 billion consensus among analysts polled by StreetAccount.
The company's consulting division generated $4.81 billion in revenue, jumping nearly 10% and surpassing the StreetAccount consensus of $4.67 billion.
IBM's infrastructure unit, which includes mainframe computers, contributed $4.24 billion in revenue, up almost 19% and well above the $3.79 billion StreetAccount consensus. On May 31, IBM started selling its latest mainframe, the z16. Each mainframe cycle generally brings revenue growth at the beginning as customers upgrade, followed by a decline. Sales of z Systems products rose 69%, compared with a decline of 19% in the first quarter.
Also in the quarter, IBM announced a plan to acquire cybersecurity startup Randori, and Francisco Partners closed its acquisition IBM's Watson health care data and analytics assets in a deal reportedly worth more than $1 billion.
IBM's gross margin narrowed to 53.4% from 55.2% in the year-ago quarter. The company said the competitive labor market impacted results in its consulting arm, continuing a trend it saw earlier in the year. The company has been working to deal with this by charging higher rates in contracts, and it's expecting a full-year pre-tax margin of 9% to 10%, which would be up over 1 percentage point year over year.
"Consulting, which makes up well over half of IBM's workforce, is most impacted by the inflationary labor market and increasing labor cost as we bring new talent on board and increase capacity," Kavanaugh said. "We are starting to capture the reality of these higher costs in our pricing, but given the time from contract signing to revenue realization, it's taking some time to see it in our margins."
Prior to the after-hours move, IBM shares were up 3% so far this year, while the S&P 500 index tumbled about 20%.
WATCH: We're not seeing a slowdown in the B2B space, says IBM CEO
IBM has published details on a collection of techniques it hopes will usher in quantum advantage, the inflection point at which the utility of quantum computers exceeds that of traditional machines.
The focus is on a process known as error mitigation, which is designed to Strengthen the consistency and reliability of circuits running on quantum processors by eliminating sources of noise.
IBM says that advances in error mitigation will allow quantum computers to scale steadily in performance, in a similar pattern exhibited over the years in the field of classical computing.
Although plenty has been said about the potential of quantum computers, which exploit a phenomenon known as superposition to perform calculations extremely quickly, the reality is that current systems are incapable of outstripping traditional supercomputers on a consistent basis.
A lot of work is going into improving performance by increasing the number of qubits on a quantum processor, but researchers are also investigating opportunities related to qubit design, the pairing of quantum and classical computers, new refrigeration techniques and more.
IBM, for its part, has now said it believes an investment in error mitigation will bear the most fruit at this stage in the development of quantum computing.
“Indeed, it is widely accepted that one must first build a large fault-tolerant quantum processor before any of the quantum algorithms with proven super-polynomial speed-up can be implemented. Building such a processor therefore is the central goal for our development,” explained IBM, in a blog post (opens in new tab).
“However, latest advances in techniques we refer to broadly as quantum error mitigation allow us to lay out a smoother path towards this goal. Along this path, advances in qubit coherence, gate fidelities, and speed immediately translate to measurable advantage in computation, akin to the steady progress historically observed with classical computers.”
The post is geared towards a highly technical audience and goes into great detail, but the main takeaway is this: the ability to quiet certain sources of error will allow for increasingly complex quantum workloads to be executed with reliable results.
According to IBM, the latest error mitigation techniques go “beyond just theory”, with the advantage of these methods having already been demonstrated on some of the most powerful quantum hardware currently available.
“At IBM Quantum, we plan to continue developing our hardware and software with this path in mind,” the company added.
“At the same time, together with our partners and the growing quantum community, we will continue expanding the list of problems that we can map to quantum circuits and develop better ways of comparing quantum circuit approaches to traditional classical methods to determine if a problem can demonstrate quantum advantage. We fully expect that this continuous path that we have outlined will bring us practical quantum computing.”
- As quantum computing evolves, all new encryption technologies will need to be developed
Virtual Reality or VR as it is called is the latest on the scene of technology to mystify me. I thought I’d really gotten into advanced technology when I began typing on an electric typewriter back in the day. My typing class in high school used manual typewriters. You know the keys really needed a good thump to make the letters imprint on the paper. Then came the IBM “Correcting Selectric.” A typewriter that could correct errors simply by backspacing. Wow! About the same time, there was the emergence of computers being used in the banking industry for complex calculations, and yes, word processing. The world was on fire with new technology that began to change the day-to-day business world.
The next advance in technology was the telephone that no longer required that you be tethered to a cord. You could pick up the phone and walk around while talking. Clever! Then before I knew it, there was the car phone for ordinary people. Remember there were folks who purchased fake phones just to look cool? And then in the early 1970s, Motorola was the first company to mass produce the first handheld mobile phone. As I recall, they had a little antenna, and you couldn’t get much service, but you were keeping up with the latest technology.
I’ve finally adjusted to my smartphone that is not tethered by a cord and can also take pictures, supply me directions, track my steps, connect me to the internet, and has “apps” galore to do any function I could possibly want or need. Want music? How about games? You can watch, stream, or listen. What’s not to love? Well, there is that. My phone is so much smarter than I am. Almost every day I discover something about my phone that I didn’t know before. All those settings! All those buttons! It’s a little intimidating.
Enter VR! VR is a simulated experience that can be similar to, or completely different from, the real world. Some days this might sound like something we could all use as an escape mechanism. VR requires a headset—which by the way is pricey—and it works by immersing you in a “virtual” setting. The applications of virtual reality include entertainment with games galore, education (such as medical or military training), and business, such as virtual meetings.
VR is big business with games of all kinds which take you into a setting where you can manipulate the avatar, the electronic image. Well, here comes the latest in this VR world of commerce. Meta (formerly called Facebook) will launch an avatar fashion store to sell virtual clothes for real money. Yes, that’s what I said—virtual “clothes” for real money! So, will your avatar be decked out in a fashionable ensemble or just something casual, you know, for your on-line virtual reality game that you can’t touch or wear.
Should you decide to purchase clothes for your avatar in this manner, might I suggest that you also consider a scholarship for our little dog, Carly too? I really think she’d like to go to college to continue her education. She is very clever and has learned many things so I’m certain she could benefit from your generosity. I’ll ask her what her degree program will be and let you know. She’s an excellent communicator. She relays information via the tail wag, her big brown eyes, and occasionally the enthusiastic bounce or bark.
Of if you would rather do something more meaningful, you might donate to our local United Way, one of the local school systems, or the Inter-Faith Compassion Ministry, or any other organization that is meaningful to you. Of course, this could mean your avatar might not be festooned in the latest style, but who would know? My apologies to those who have a better appreciation for this new technology and for well-dressed avatars.
Bonnie Brown writes a weekly column for The Oxford Eagle. Contact her at bbrown@olemiss.edu.
Photo: iStock
Photo: iStock
In 2018, the World Trade Organization asked: can blockchain revolutionize international trade? It reported on possible applications of blockchain and stated that the technology opened interesting opportunities to enhance the efficiency of several processes and cut costs in these areas.
The author of the report said that if the projects under development succeeded, blockchain could become the future of trade infrastructure and the biggest disruptor to the shipping industry and to international trade since the invention of the container.
One of the highest profile ventures in this space was we.trade, which started offering commercial services in 2019. A joint-venture company owned by 12 European banks and IBM, it promised to enhance cash flow by digitizing paper-based processes.
However, the platform struggled to deliver a return on investment for its backers. Even financial support from IBM and a new capital round were not enough to prevent it folding in May.
It is interesting to see a shift away from blockchain for some trade finance-related initiatives, especially since blockchain was positioned as the key differentiator for their solution
Jacco De Jong, Bolero
Just a few weeks later, B2B online trade platform Serai also admitted defeat in its efforts to build a commercially viable business.
International Business Machines Corp. had a better-than-expected second quarter, but shares were not rewarded Monday as an executive warned about the effects of the strengthening dollar.
IBM IBM, +0.10% reported second-quarter net income of $1.39 billion, or $1.54 a share, compared with $1.47 a share in the year-ago period, while adjusted earnings, which exclude stock-based compensation expenses and other items, were $2.31 a share, up from $2.23 a share a year ago. Revenue increased to $15.54 billion from $14.22 billion in the year-ago quarter, after adjusting for discontinued operations, namely IBM’s spinoff of managed infrastructure-service business Kyndryl Holdings Inc. KD, +4.38%.
Analysts surveyed by FactSet expected adjusted earnings of $2.26 a share on revenue of $15.08 billion.
Shares declined more than 4% after hours, following a 1.3% decline to close Monday’s regular session at $138.13. IBM’s stock has been positive in a rough year, rising 5.9% so far in 2022 while the Dow Jones Industrial Average — which counts IBM as a component — is down 13.9%, the S&P 500 index SPX, -0.12% is off 19% and the tech-heavy Nasdaq Composite Index COMP, -0.10% is down 27.4%.
IBM reported that software revenue grew 6.4% to $6.2 billion, consulting revenue increased 9.8% to $4.8 billion, while infrastructure revenue grew 19% to $4.2 billion.
While IBM declined to provide an earnings forecast at the beginning of the year, the company expressed optimism about the year in the previous quarter, forecasting that the loss of Russian business because of the war in Ukraine was the only real headwind it faced and it expected demand to remain strong were a “very slight recession” to occur.
Last quarter, the company also forecast revenue growth at the high end of its previously forecast model, which was the high end of the mid-single-digit range. Analysts expect full-year revenue of $60.54 billion, or a 5.6% increase from the previous year.
“With our first-half results, we continue to expect full-year revenue growth at the high end of our mid-single-digit model,” IBM Chief Executive Arvind Krishna said in a statement.
Analysts were concerned about the effect of the strengthening dollar on IBM’s financials heading into the print, and the company seemed to confirm some issues there. Chief Financial Officer James Kavanaugh told Reuters ahead of Monday afternoon’s conference call that foreign-exchange rates would hurt second-half revenue more than previously expected, and spelled that out in more depth in the call.
“With the significant movement of the U.S. dollar as compared to nearly every currency, at mid-July spot rates, currency translation will not be about a 6-point headwind to revenue growth for the year,” Kavanaugh said on the call, after previously guiding for a headwind of 3% to 4%. “That’s a degredation of about $1.5 billion from April’s rates, with most of that incremental impact still ahead of us in the second half.”
The effects in the third quarter could be even sharper, Kavanaugh said.
“At current spot rates, currency translation has increased to about an 8-point headwind to revenue growth, impacting our reported revenue, profit and cash,” he said of the current quarter, while adding that the launch of a new mainframe product in the second quarter will lead to a sharper quarter-over-quarter decline in the current period than is typical.
Kavanaugh also confirmed that IBM has been raising prices to deal with higher salaries and inflation.
“Our year-to-year gross margin decline reflects escalating labor and component costs,” the CFO said. “We’re addressing this through pricing, though it takes time to show up in our margin profile, especially in consulting.”
In today's volatile economic climate, the need for businesses to operate with efficiency is greater than ever. This reality, coupled with the continued demand from employees for hybrid work environments, has led many organizations to modernize their IT solutions in ways that allow them to operate more flexibly and intelligently.
Such concerns are especially pressing for small- and mid-sized businesses. According to a recent survey from Frost & Sullivan, 76% of respondents found the workload of IT departments has increased since the adoption of flexible work models, and 95% of companies are planning to consolidate their IT tools in 2022. And while budgets have continued to rise year-over-year for 77% of companies, such increases are not sustainable for SMBs. To remain competitive, these organizations require modern IT tools and services tailored specifically to their needs.
Here are five ways hardware investments can help SMB IT teams Strengthen their operations and keep up with changing business demands:
1. Modernize applications to maximize value from data
Taking a containerized approach to applications can make deployment and management more consistent while using fewer computational resources. Containers provide lightweight runtime environments for applications, enabling the deployment of microservices to update applications with greater efficiency. Rather than having to augment an entire application to meet increased loads, DevOps can scale only the specific containers with the greatest loads.
Investing in modern servers like IBM Power10, which has recently been expanded with mid-range and entry-level scale-out solutions, gives SMB IT teams the flexibility to run virtual machines (VMs) and containerized applications on the same hardware. An expanding ecosystem of solutions with Red Hat OpenShift enables IBM to collaborate with clients, connecting workloads to cloud-native services that maximize the value of their existing infrastructure investments and drive ROI on new projects.
2. Secure infrastructure to defend against attacks
Safeguarding data is an imperative for organizations of all sizes, but it can be especially taxing on SMBs with limited resources. New servers can help smaller IT teams stay on top of security with enterprise-grade features like transparent memory encryption, enhanced processor and system isolation, and the ability to leverage the Linux Foundation's OpenBMC project for easier scale-out management while preventing emerging side-channel attacks from hackers. In addition, the latest entry-level and mid-range servers also employ advanced security standards such as quantum-safe cryptography and fully homomorphic encryption, bringing even greater peace of mind to data management.
3. Automate operations to Strengthen productivity
For short-staffed organizations struggling to tackle the challenges of remote work, the ability to automate operations is key. By investing in modern hardware, IT teams can greatly enhance their productivity by automating manual infrastructure tasks so they can focus on higher-value projects.
4. Pay as you go to lower costs
Cloud services offer many benefits to IT departments, but costs can sometimes outweigh the value of the offering. To address this, companies have begun providing flexible consumption models with pay-as-you-go options. This approach allows businesses to quickly adapt to changing business needs by moving on-premises applications into the cloud as workloads demand.
IBM offers by-the-minute metering for its Power Private Cloud, giving departments more control over the cost of running solutions like OpenShift. These new consumption models build on capabilities already available with the IBM Power Virtual Server to enable greater flexibility in clients' hybrid journeys.
5. Work with a hybrid cloud partner
With hybrid cloud, companies can modernize their IT services and create the optimal infrastructure and operating environment. IBM Power Virtual Server enables architectural consistency across an entire IT infrastructure.
This post was created by IBM with Insider Studios.
The MarketWatch News Department was not involved in the creation of this content.
Aug 04, 2022 (Heraldkeepers) -- New Jersey, USA,- The Global Immersive Virtual Reality Market Research Report, which contains both qualitative and quantitative data, offers a thorough picture of the market. It includes a summary and projection for the global Immersive Virtual Reality market based on a variety of segments. The nations and segments found within each region make up further sub-segments of the global Immersive Virtual Reality market. The report examines numerous countries’ futures as well as current trends and commercial opportunities.
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