Will IBM See Top Line Growth In 2020?

No, as per Trefis estimates IBM (NYSE:IBM) is expected to report a small decline of 0.8% y-o-y in FY 2020 and record revenue around $79.7 billion. For 2019 we estimate IBM’s Top line to grow slightly by 0.9% y-o-y to around $80.3 billion. In that, IBM’s technology and cloud business, is expected to contribute $34.8 billion to IBM’s 2019 revenues, making up 43.3% of IBM’s $80.3 billion in expected revenues for 2019. The technology and cloud segment contribution to revenue is just less than 2x that of the Software business. The technology and cloud business is one of the key components to IBM’s price. We discuss IBM’s valuation analysis in full, separately.

Below we discuss IBM’s business model, followed by sections that review past performance and 2019 and 2020 expectations for IBM’s revenue drivers and competitive comparisons of its revenue with HP and Accenture.

You can look at our interactive dashboard analysis ~ IBM Revenues: How Does IBM Make Money? ~ for more details.

IBM Business Model:

What does IBM offer:

• The company provides integrated solutions and products that can leverage: data, information technology, deep expertise in industries and business processes, with security, partners, and alliances. IBM solutions enable clients to change their businesses and help them engage with their customers and employees in new ways.
• These solutions are from a portfolio of consulting and IT implementation services, cloud, digital and cognitive offerings, and enterprise systems and software.

Operating Segments:

• Cognitive Solutions comprises a portfolio of primarily software capabilities that help IBM’s clients to identify actionable new insights and inform decision-making for competitive advantage.

• Technology Services & Cloud Platforms (TS&CP) provides an IT infrastructure and platform services that can create business value for clients. Clients gain access to high-quality services, flexibility, and economic value.

• Business Services provides business consulting services focused on market solutions that could help clients shape digital blueprints and customer experiences, define their cognitive operating models, and unlock the potential in all data to improve decision-making.

• Global Financing Capabilities: Client Financing is lease, installment payment plan, and loan financing to end users and internal clients for terms up to seven years, primarily for new and used IT hardware, software, and services where the company has expertise. Commercial Financing is short-term working capital financing to suppliers, distributors, and resellers of IBM and Original Equipment Manufacturer (OEM) products and services.

What Are The Alternatives?

• Major competitors are HP, Accenture, Microsoft, and other software, hardware, and consulting players .

What Is The Basis of Competition?

• The industry primarily competes in technology innovation; performance; price; quality; brand; its broad range of capabilities, products and services; client relationships; the ability to deliver business value to clients; and service and support. In order to maintain leadership, a corporation must continue to invest, innovate ,and integrate. For how its revenue compares to its peers, please visit our interactive dashboard – IBM’s Revenue.

Revenue has been stable over the years in the range of $79 – $80 billion over the last few years

• Total Revenue has been quite stable around $79-80 billion from 2016 to 2018. Trefis estimates a small growth of about 0.9% and Revenue to reach $80.3 billion in 2019. In 2020 Trefis estimates revenue to be around $79.7 billion.
• Cognitive Software Solutions Revenue has increased slightly from $18.2 billion in 2016 to $18.5 billion in 2018. Trefis estimates the revenue from the segment to be around $18.6 billion and $18.8 billion in 2019 and 2020, respectively.
• Technology & Cloud Services Revenue has decreased slightly from $35.3 billion in 2016 to $34.5 billion in 2018. Trefis estimates the revenue from the segment to be around $34.8 billion and $33.8 billion in 2019 and 2020, respectively.
• Business Services Revenue has increased slightly from $16.7 billion in 2016 to $16.8 billion in 2018. Trefis estimates the revenue from the segment to be around $17 billion and $17.2 billion in 2019 and 2020, respectively.
• Servers Revenue has increased from $3.8 billion in 2016 to $4.6 billion in 2018. Trefis estimates the revenue from the segment to be around $4.7 billion and $4.8 billion in 2019 and 2020, respectively.
• Storage Revenue has decreased from $2.1 billion in 2016 to $1.7 billion in 2018. Trefis estimates the revenue from the segment to be around $1.8 billion in 2019 and 2020.
• Operating Systems and Others Revenue has decreased from $1.8 billion in 2016 to $1.7 billion in 2018. Trefis estimates the revenue from the segment to be around $1.7 billion in 2019 and 2020.
• Financing and Others Revenue has decreased from $2 billion in 2016 to $1.8 billion in 2018. Trefis estimates the revenue from the segment to be around $1.7 billion in 2019 and 2020.