IBM 3Q16 Earnings Call Notes

International Business Machines (IBM) Q3 2016 Results

Martin Schroeter – Senior Vice President and Chief Financial Officer

Currency was a modest tailwind

“for the first time in quite a while currency was a modest tailwind to revenue growth.”

Systems revenue was down

“Our systems revenue was down this quarter. The z Systems performance reflects the fact that we are seven quarters into the product cycle where POWER reflects the secular decline in UNIX mitigated by growth in Linux. There is a tremendous amount of change in our industry and we are continuing to invest where we see the best opportunities.”

Strategic imperatives represent 40% of IBM now

“Over the last 12 months, strategic imperatives delivered nearly $32 billion in revenue and now represent 40% of IBM. We had strong performance in our cloud offerings which were up over 40% led by our as-a-service offerings. We exited the third quarter with an as-a-service run rate of $7.5 billion. That’s up from $6.7 billion last quarter and the bulk of the increases organic. So we are building scale in these businesses.”

Block chain potential

“We believe block chain has the potential to do for trusted transactions what the internet did for information. We are building a complete block chain platform and are now working with over 300 clients to pioneer block chain for business, including CLS, who settles $5 trillion per day in the currency markets to implement a distributed ledger in support of its payment netting service and Bank of Tokyo Mitsubishi for smart contracts to manage service level agreements and automate multi party transactions.”

Watson isn’t going to run on someone else’s cloud

“And it came up as you heard on the call, will Watson run on someone else’s cloud? No, it won’t, it will run on the IBM cloud. And we are doing all of that with deep industry expertise and that’s what our clients are looking for, that cognitive capability on the IBM cloud with deep industry expertise and you can see that in our health, you can see that in our IoT and you can see now in financial services which we just announced a couple of weeks ago.”