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IBM's Rometty defends bumpy financial ride as company shifts strategy

Joab Jackson | Oct. 21, 2014
In a call with investors, IBM CEO Ginni Rometty vigorously defended IBM's pursuit of emerging high-growth markets.

These are the potential areas of high-value growth (and high profit margin) for the company.

"These will reorder the industry and therefore we have to reinvent ourselves ... around these things," Rometty said.

Rometty pointed out the many initiatives IBM has thrown itself into to pursue the emerging markets.

This year alone the company started a business practice around its Watson cognitive computing service, is plowing $1.2 billion into its cloud data centers and another $1 billion into ramping up Bluemix cloud software platform.

It has also set off on a new wave of partnerships with the likes of Apple and SAP, which point the way to IBM "being the go-to for entering the enterprise business," Rometty said.

One analyst on the call wondered if new businesses and startups are becoming more accustomed to use other, newer services for these duties, rather than trusting IBM. Rometty disagreed with this assessment, pointing out that there are many startups using IBM's Softlayer infrastructure services and that the Watson platform has thus far attracted the attention of over 3,000 partners.

More importantly, she noted, IBM's overall goal is to be the business that enterprises go to in order to incorporate these new technologies into their operations. While there are many innovative startups, enterprises still need a way to integrate new technologies into their overall infrastructure, a role IBM is uniquely suited to help with.

When approaching the cloud, enterprises are now moving into hybrid operations, in which some jobs, especially those that need to be stood up quickly, are run in the cloud, while systems-of-record will continue to be run in-house.

"We are seeing that play out. That is what people are looking for," Rometty said. In this scenario, IBM will work to be a "navigator," to help enterprises build hybrid systems.

The results are starting to pay off, Rometty assured the analysts, and touted some metrics in this regard.

Big data and analytics brought in $16 billion in revenue fiscal 2013, and that business is growing at 8 percent this year to date. Cloud technology has grown 50 percent year to date. Cloud services brought in $4.4 billion in 2013 and have shown a 50 percent growth rate this year to date. Social, mobile and security products and services are also showing significant growth rates, she said.

"They are within themselves very large businesses with high growth rates," Rometty said.

(IDG News Service reporter Mikael Ricknäs contributed to this report.)


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