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IBM’s cloud blooms, bolstered by Hartford deal

Fri 25 Apr 2014

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IBM announced that its cloud revenue in Q1 2014 was up more than 50% and said its cloud delivered as a service, had a Q1 annual run rate of $2.3bn, which had doubled year to year boosted by a new $500m deal.

The financial statement indicated IBM move away from its traditional business lines to more value added cloud-based services.

“In the first quarter, we continued to take actions to transform parts of the business and to shift aggressively to our strategic growth areas including cloud, big data analytics, social, mobile and security,” said Ginni Rometty, IBM chairman, president and chief executive officer. “As we move through 2014, we will begin to see the benefits from these actions. Over the long term, they will position us to drive growth and higher value for our clients.”

The blue-chip giant announced Q1 diluted earnings of $2.29 per share, a year-to-year drop of 15%. Operating (non-GAAP) diluted earnings were $2.54 per share, compared with operating diluted earnings of $3.00 per share in the first quarter of 2013, also down 15%.

Q1 net income was $2.4bn billion, down 21% year-to-year. Operating (non-GAAP) net income was $2.6bn compared with $3.4bn in Q1 2013, down 22%. It said its results included the impact of a charge of approximately $870m for workforce rebalancing and a gain of nearly $100m for the divestiture of the customer care outsourcing business, as it warned in January 2014.

Total Q1 revenues were $22.5bn, down 4% (down 2%, adjusting for currency; down 1%, excluding the customer care outsourcing business) from Q1 2013.

IBM also announced a new six-year $500m technology services agreement with insurer The Hartford to implement a new service model that includes a private cloud infrastructure.

The Hartford will move to a private cloud-based infrastructure on IBM’s PureFlex System. IBM will also provide a number of other services related to mainframe, storage, backup and resiliency. The Hartford will define the services it requires, and IBM will be responsible for the solution and delivery of those services.

“As The Hartford continues to execute on its strategic plan, we are making significant technology investments to increase operational effectiveness and improve our competitiveness,” said Andy Napoli, president of consumer markets and enterprise business services at The Hartford. “The partnership with IBM will help The Hartford implement a strategic technology infrastructure that will provide us with greater agility and offer us more flexibility and transparency as we continue to grow our businesses.”

“Today’s announcement is an example of how leading organisations are utilising cloud technology to gain competitive advantage,” said Philip Guido, general manager, IBM Global Technology Services, North America. “Clients today are looking for IT partners who can understand and help drive their business with a focus on innovation and delivering business outcomes, not just IT efficiency. This expansion of our partnership with The Hartford illustrates the work IBM is leading with cloud.”

As part of the agreement, The Hartford and IBM will also partner on the creation of a joint innovation committee to foster collaboration on strategic initiatives. The project will leverage the expertise of both firms, market insights and research to build new business models and competitive capabilities that will enhance The Hartford’s ability to anticipate and meet the needs of customers and agents.

Chris Wheal

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