How IBM Makes Money: Software, Consulting, Infrastructure

The company has clients in more than 175 countries and competes with hundreds of companies ranging from small businesses to large multinational corporations. Thus, a FY23 market price for IBM of $91.35 excluding its GTS segment would be a fair estimate should growth/decline rates remain relatively consistent with where they’ve been. Business intelligence refers to the procedural and technical infrastructure that collects, stores, and analyzes data produced by a company.

IBM, which is based in Armonk, N.Y., is sensitive to the perception that Americans are losing jobs to Indians. After Mr. Trump won the election, IBM’s chief executive, Ginni Rometty, pledged to create names word whizzle 25,000 new American jobs. She also joined one of Mr. Trump’s now-defunct business advisory councils. The Financing segment generated $774 million in revenue, down 20.6% compared to FY 2020.

IBM said it aims to complete the transaction as a tax-free spinoff to IBM shareholders by the end of 2021. This statistic shows an Information Technology industry growth rate forecast for the time period from 2018 to 2023, separated by segment. “Emerging tech”, which includes fields like IoT software, big data/analytics, AR/VR, etc., is expected to see the most growth, with forecasts suggesting that the sector will grow by 104 percent between 2018 and 2023. IBM’s Software segment bridges the company’s software solutions with its hybrid cloud platform in order to help clients with their data needs and to help them automate and secure their systems.

IBM has produced less than stellar results in its services and systems segments, what were once the staples of the company’s success. IBM has seen Global Business Services revenue decline 6% YoY, Global Technology Services revenue decline 4% YoY, and Systems revenue decline 16% YoY based on 3Q20 TTM results. While systems is exhibiting the largest losses, it’s also the lowest revenue producing segment, generating $1.3 billion in revenue in 3Q20. If Systems continue on their current downward trend of 16% revenue declines YoY for the next three years, they will produce a 3Q23 revenue of roughly $770 million. IBM integrated the consulting service into a new global business unit called IBM Business Consulting Services, extending the reach of its Global Services Business.

IBM announced the closing of its acquisition of Turbonomic in June 2021 as part of its new focus on cloud services and AI. In 2002, the company sold its consulting services business—PwC Consulting—to IBM for approximately $3.5 billion. In recent years, the company has set its sights on becoming a leader in cloud computing, a strategic push underscored by its 2019 acquisition of Red Hat Inc.

Working with IBM will include the creation of joint offerings with the EY developer ecosystem and provides access to IBM’s leading enterprise technologies to help drive results for clients. If we were to exclude Global Technology Services from IBM’s 3Q20 revenue, IBM would have produced roughly $11.1 billion in 3Q20 revenue. I’m excluding this to create an allusion to how my 3Q23 forecasts will be compared to now.

The open source development model on which the company was built was aimed at challenging what its founders saw as the monopolistic tendencies of the technology industry. The company went public in 1999 with a record-breaking initial public offering . The company also said it expects third-quarter revenue of $17.6 billion and an adjusted profit per share of $2.58, roughly in line with Street estimates. IBM, which has sought to make up for slowing software sales and seasonal demand for its mainframe servers, said it would now focus on open hybrid cloud and AI solutions that will account for more than half of its recurring revenues. IBM will list its IT infrastructure services unit, which provides technical support for 4,600 clients in 115 countries and has a backlog of $60 billion, as a separate company with a new name by the end of 2021.

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