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IBM eyes $1 trillion hybrid cloud opportunity

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Arvind Krishna, IBM chief executive officer.
Arvind Krishna, IBM chief executive officer.

Computing giant IBM is looking to seize the $1 trillion hybrid cloud opportunity.

So says Arvind Krishna, IBM chief executive officer, commenting on the company’s 2020 third quarter financial results.

“The strong performance of our cloud business, led by Red Hat, underscores the growing client adoption of our open hybrid cloud platform,” says Krishna.

To accelerate its hybrid cloud growth strategy and drive digital transformation for its clients, IBM earlier this month announced that it will separate the managed infrastructure services unit of its global technology services division into a new public company – NewCo.

“Separating the managed infrastructure services business creates a market-leading standalone company and further sharpens our focus on IBM’s open hybrid cloud platform and AI capabilities,” says Krishna.

“This will accelerate our growth strategy and better position IBM to seize the $1 trillion hybrid cloud opportunity.”

Among the major highlights of the results, IBM posted revenue of $17.6 billion, down 2.6% (down 3.1% adjusting for divested businesses and currency).

The company’s cloud and cognitive software revenue was up 7% (up 6% adjusting for currency), and the total cloud revenue was $6 billion, up 19%.

It posted total cloud revenue of $24.4 billion over the last 12 months, up 22% (up 25% adjusting for divested businesses and currency).

Red Hat revenue was up 17% (up 16% adjusting for currency), normalised for historical comparability.

IBM completed the acquisition of open source software giant Red Hat in July 2019 in a deal worth $34 billion.

“In the third quarter, we continued to deliver strong gross profit margin expansion, generated solid free cash flow and maintained a sound capital structure with ample liquidity,” says James Kavanaugh, IBM senior vice-president and chief financial officer.

“We have the necessary financial flexibility to increase our investments in hybrid cloud and AI technology innovation and skills, while remaining committed to our long-standing dividend policy.”

In the third quarter, the company generated net cash from operating activities of $4.3 billion, or $1.9 billion excluding global financing receivables. IBM’s free cash flow was $1.1 billion. The company returned $1.5 billion to shareholders in dividends.

IBM ended the third quarter with $15.8 billion cash on hand, which includes marketable securities, up $6.7 billion from year-end 2019. Debt, including global financing debt of $20.9 billion, totalled $65.4 billion.

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