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Is IBM Turning Around?


By: Mary Jander

IBM (NYSE: IBM) reported its best quarterly sales growth in years this week, exceeding analyst expectations and prompting tentative speculation that a long-awaited turnaround in the company’s fortunes may be underway.

IBM posted overall revenue of $16.7 billion, up 6.5% year-over-year. Operating gross margin was 58%. Operating income rose 102% year-over-year to $3.5 billion, and diluted non-GAAP EPS was $3.35, up 78%.

But IBM’s report was significant for more than these numbers. This was the first report to be issued since the company separated from Kyndryl Holdings (NYSE: KD) on November 3. It was also the first to be based on a newly focused segmentation of corporate earnings, an exercise that IBM’s undertaken many times before in order to wrangle its many parts into an economically successful whole. It’s worth taking a dive into the specifics to see whether the latest taxonomy may indeed prove to be the one that finally works.

IBM’s Mission Refocused

Since CEO Arvind Krishna took the helm in April 2020, he has articulated his intention to focus IBM on two areas, hybrid cloud and artificial intelligence. This is meant to sharpen IBM's go-to-market strategy. Indeed, everything IBM sells is part of a platform sustaining hybrid cloud and AI, according to CEO Krishna. Hence, the jettisoning of businesses such as Kyndryl and more recently Watson Health, which distracted from the focus.

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