International Business Machines (NYSE:) shares have struggled this year as investors’ growing appetite for growth has failed to benefit the company and its defensive portfolio.
Still, IBM has worked hard to reaccelerate revenue growth. In addition to his M&A deals completed by traditional IT companies, IBM has also invested in the field of artificial intelligence (AI).
New products to convince new types of investors
In 2023, the main topic on Wall Street so far is AI. Shares of big companies such as NVIDIA (NASDAQ:), Microsoft (NASDAQ:), Alphabet (NASDAQ:), and Oracle (NYSE:) have all surged in recent months as investors. Struggling to increase exposure to generative AI technology. Although IBM is not recognized as a direct beneficiary of AI, it has launched several tools and initiatives to gain traction on this front.
Among other efforts, IBM is reportedly partnering with the All England Club to provide AI-generated audio commentary and subtitles for Wimbledon matches. Tennis fans can witness history as his AI-generated match commentary will be available on the Wimbledon app and website this July.
“The AI and data platform IBM is using to create Wimbledon’s unique fan experience is driving business transformation with customers across all sectors and industries,” said Jonathan Adashek, senior vice president of marketing and communications. It’s the same technology we use to do that.” For IBM.
Such commentary is available thanks to IBM’s watsonx, an enterprise-ready AI and data platform. IBM’s AI-focused platform is based on three main pillars. Watsonx.ai – A studio for new foundational models (FM), generative AI and machine learning (ML). watsonx.data – Focuses on data. watsonx.governance – This enables customers to build accountable, transparent and explainable AI workflows.
IBM’s Watson platform is also being leveraged to strengthen its partnership with Adobe (NASDAQ:). Recently, two technology companies announced further partnerships with a new focus on AI.
Under the terms of the new partnership, IBM Consulting will launch a new portfolio of Adobe consulting services focused on generative AI environments. Meanwhile, Adobe customers will also have access to experts from IBM Consulting focused on AI, ML and data analytics.
Matt Candy, Global Managing Partner, IBM iX Customer & Experience Transformation, IBM Consulting, said: .
It’s no surprise that the company is focusing more and more on generative AI. CEO Arvind Krishna said earlier this year that the company was interested in replacing thousands of jobs with AI technology.
“It’s easy to imagine that 30% of that will be replaced by AI and automation in five years,” Krishna told Bloomberg.
M&A deals to reaccelerate growth
After struggling for more than a decade to play a more prominent role in the technology revolution, IBM spent $34 billion in 2019 to acquire Red Hat, one of the world’s leading providers of enterprise open source software solutions. announced that it would invest With the acquisition of RedHat, IBM is interested in pursuing larger hybrid he cloud opportunities.
But almost four years after the acquisition closed in the summer of 2019, IBM’s stock is actually trading down a few percentage points. The stock hit a multi-year high in December 2022, but has since fallen as investors reshuffled their portfolios to gain more exposure to growth.
That’s one reason IBM is reportedly looking to buy software company Apptio for about $5 billion, according to The Wall Street Journal. The business, owned by private equity firm Vista Equity Partners, which it acquired in 2019 for about $2 billion, focuses on solutions that allow users to track the cost of software and services. Bank of America (NYSE:) is named as one of Apptio’s biggest customers.
Partnering with Apptio is another step in IBM’s ongoing transformation process. In addition to its massive RedHat acquisition, IBM spun off several businesses, including Kyndryl Holdings. The company is also reportedly considering selling its weather business, which includes the popular weather.com app.
The M&A deal aims to accelerate growth and make the company’s portfolio more attractive to new types of investors. Two months ago, he had $14.3 billion in quarterly revenue, up slightly from the year-ago quarter. Software revenue rose 2.6% to $5.9 billion, beating expectations of $5.76 billion. Software business unit growth was one of the key highlights of the first quarter earnings report.
IBM, like other companies, is suffering from a broader economic slowdown. Revenue in the company’s second-largest business unit, the consulting division, rose 2.8% to $4.96 billion. Even more negatively, IBM generated her $1.34 billion in free cash flow, which was significantly off his projected $2.18 billion.
Despite not meeting its FCF target, the company still reaffirmed its full-year FCF outlook of $10.5 billion. Full-year sales will also maintain +3-5%. Krishna’s comments in the earnings PR show the vision he has for his IBM.
“Our first-quarter results are a testament to IBM’s ability for customers to leverage their unique combination of open hybrid cloud platform, enterprise-focused AI, and business expertise to increase productivity and improve operational efficiency,” he said. It shows that we are keeping an eye on it,” he said.
IBM is set to report its second quarter results on July 19th.
summary
The plan is simple. IBM aims to be a leaner, growth-focused company by offering more than a portfolio of values and defenses. Within a few years, IBM shareholders will be looking to a new breed of company to take full advantage of the hybrid cloud and artificial intelligence opportunities.
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Neither the author, Shane Negle, nor this website, The Tokenist, provide financial advice. Please review our website policies before making any financial decisions.
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