Once known mainly for hardware and servers, American technology giant IBM is shifting towards emerging, high-margin businesses. At the company’s annual investor meeting, held recently in New York, executives outlined an aggressive plan targeting $40 billion in annual revenue from areas such as cloud computing, big data, security software, analytics, mobile and social, which IBM calls its "strategic imperatives", by 2018.
Last year these businesses generated $25 billion in revenue, or 27% of IBM’s total $93 billion in sales. If realized, the $40 billion would represent about 44% of the total $90 billion revenue that analysts expect from IBM by 2018. The company’s long-term plan is to hit "low single-digit" revenue growth and "high single-digit" growth in operating earnings per share.
IBM’s revenue has fallen for the past 11 quarters, and earnings growth has been sporadic. During this period, the company was reinventing itself, selling off unprofitable units in businesses such as low-end servers, semiconductors and cash registers, Reuters reports. Virginia Rometty, who became IBM’s Chief Executive in 2012, has said she is happy to jettison revenue from the unprofitable businesses, dubbing them "empty calories."
One hitch, the company concedes, is that because more than half of its revenue comes from overseas, the strong US dollar will likely curb sales by more than 6% this year. In January, it expected a currency-exchange impact of 5% to 6% to its revenue.