WASHINGTON: International Business Machines Corporation IBM is targeting $1 billion in revenues in 2016 from its cloud infrastructure business, SoftLayer, up from $700 million to $800 million expected for 2015, as per Bloomberg, which cited sources familiar with the matter.
Bloomberg puts it as an “ambitious goal” that highlights the company’s attempts to grow its cloud business amid stiff competition from other tech giants like Microsoft Corporation.
Though IBM is a late entrant in the cloud space, it has now become imperative for the company to grow its cloud business as it struggles with declining sales and profitability. The company missed the Zacks Consensus Estimate for revenues in the trailing four quarters. SoftLayer remains one of its “biggest bets” to effectively combat competition in the cloud computing space.
SoftLayer is the primary infrastructure of IBM’s cloud operations. IBM acquired SoftLayer for nearly $2 billion in 2013 and since then has been rapidly expanding its cloud data center footprint worldwide. In 2014, it injected $1.2 billion into its global expansion strategy.
Data centers form the backbone of IBM’s business and the company’s continuing investment reflects its commitment to develop the technology. As per Bloomberg, cloud services and software contributed $7 million to its total revenue of $92.8 billion in 2014. For the 12 months ended Sep 30, 2015, cloud services revenues reached $9.4 billion. In the third quarter of 2015, Softlayer’s revenues grew in the double digits.
However, IBM does not provide any split up of revenues for its cloud services including that of SoftLayer. This is soon expected to change as Amazon has started to report revenues from AWS separately. The trend is likely to be adopted by Google and Microsoft as soon as next year according to Forrester analysts.
Bloomberg quoted analysts saying, “IBM, VMware, and the other public cloud providers had better take notice and start reporting clear, distinct revenue from public cloud platform services. They must stop lumping their public clouds in with consulting, implementation and on-premises private-cloud-technology sales.”
Apart from cloud, other long-term growth drivers include Big Data & business analytics (worldwide data spending expected to be $266 billion, revenues are likely to grow at 6% CAGR through 2017), mobile ($103 billion addressable market), security ($74 billion market opportunity) and social business ($89 billion addressable market).
