A few months ago at the CNBC Transformation Conference, IBM CEO Arvind Krishna drew a picture of a company in the midst of a transformation. He said he wanted to take advantage of IBM’s $ 34 billion acquisition of Red Hat in 2018 to help customers manage the growing hybrid cloud world while using artificial intelligence to increase efficiency.
It seems like a good enough approach. But instead of the new strategy acting as a major driver of growth, IBM’s profits today showed that revenue from cloud and cognitive software fell 4.5 percent to $ 6.8 billion. Meanwhile, the cognitive applications ̵
If Krishna was looking for a silver lining, he might be reassured by the fact that Red Hat itself is performing well, with revenues up 18% from a year ago, according to the company. But overall, the company’s revenue fell for the fourth consecutive quarter, leaving the executive branch in nearly the same position as its predecessor, Ginny Rometti, who led IBM during 22 consecutive quarters of revenue losses.
Krishna outlined his strategy in November, telling CNBC, “The acquisition of Red Hat has given us the technology base on which to build a hybrid technology platform in the cloud, based on open source and based on giving choice to our customers as they go. journey. “For now, the approach simply does not generate the growth that Krishna expects.
The company is also in the midst of unbundling its legacy management of infrastructure services, which, Krishna said in a November interview, should allow Big Blue to focus more on its new strategy. “With the success of this acquisition, which now gives us fuel, we can take the next and bigger step of bringing out managed infrastructure services. So the rest of the company can be absolutely focused on the hybrid cloud and artificial intelligence, “he said.
Although it is certainly too early to say that his transformation strategy has failed, the results are not yet available, and IBM’s falling top line must be as disappointing for Krishna as it is for Rometi. If you are moving the company towards more modern technologies and far from the inherited ones, at some point you should start to see results, but so far this is not the case for any of the leaders.
Krishna continued to build on that vision late last year by purchasing some additional pieces such as cloud application performance monitoring company Instana and hybrid cloud consulting firm Nordcloud. He did this 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 Purcells said, referring to his poorly performing teams, “you’re what the record tells you you are.” At the moment, IBM’s records continue to move in the wrong direction. Although it makes some gains with Red Hat, it’s just not enough to make up for the losses and something needs to change.