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IBM transformation battle continues with cloud and AI revenue down 4.5% – TechCrunch

A few months ago, IBM CEO Arvind Krishna painted a picture of a company in the midst of a transformation at CNBC’s Transform conference. He said he wanted to take advantage of IBM’s $ 34 billion 2018 Red Hat acquisition to help customers manage a growing hybrid cloud world while using artificial intelligence to create efficiency.

It seems like a healthy enough approach. But instead of the new strategy acting as a major growth engine, IBM’s earnings today showed that its cloud and cognitive software revenues fell 4.5% to $ 6.8 billion. Meanwhile, cognitive applications ̵

1; where you find AI revenue – were flat.

If Krishna was looking for a silver lining, he might be able to take comfort in the fact that Red Hat itself did well with a turnover of 18% compared to the year before, according to the company. But all in all, the company’s revenue fell for the fourth consecutive quarter, leaving management in much the same position as its predecessor Ginni Rometty, which led IBM over 22 equal quarters of revenue losses.

Krishna laid out its strategy in November, telling CNBC: “The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open source, and based on giving our customers choices when embarking on this journey. . So far, the approach is simply not generating the growth that Krishna expected.

The company is also in the midst of appointing its older department of managed infrastructure services, which, as Krishna said in the same November interview, should allow Big Blue to concentrate more on its new strategy. “With the success of the acquisition that is now giving us fuel, we can then take the next step and the bigger step of taking out the managed infrastructure services. So the rest of the company can be completely focused on hybrid cloud and artificial intelligence, ”he said.

While it is certainly too early to say that his transformation strategy failed, the results are not there yet, and IBM’s declining top line must be as frustrating for Krishna as for Rometty. If you steer the company towards more modern technologies and away from the older ones, at some point you should start to see results, but so far this has not been the case for any of the leaders.

Krishna continued to build on this vision late last year by acquiring some additional pieces such as cloud applications, performance monitoring firm Instana and hybrid cloud consulting firm Nordcloud. He did so to build a broader portfolio of hybrid cloud services to make IBM more of a one-stop-shop for those services.

As retired NFL football coach Bill Parcells used to say, referring to his poorly performing team: “You are what your record says you are.” Right now, IBM’s record is going in the wrong direction. While it provides some gains with Red Hat up front, it is simply not enough to offset the losses and something needs to change.

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