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IBM CEO Arvind Krishna: Hybrid Cloud, AI Are Helping Customers Meet Today’s Challenges

‘Harnessing the power of technologies such as hybrid cloud and AI remains essential as our clients face a number of strategic challenges and opportunities, whether it is competing for talent, supply chain issues, inflation, cybersecurity or geopolitical instability,’ says IBM CEO Arvind Krishna.

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IBM reported positive performance for the first quarter of its fiscal year and expects to see strong performance following the recent spin-off of its managed infrastructure business and despite growing concern of an upcoming recession.

In prepared remarks and when answering questions from analysts during the quarterly earnings call Tuesday, IBM Chairman and CEO Arvind Krishna said the tech giant’s consulting, software and other segments will be able to withstand any major economic event in the future.

“What we‘re hearing from clients is clear—technology has become a fundamental source of competitive advantage,” Krishna said on the call. “It is at the very center of how businesses scale and is no longer perceived primarily as a way to cut costs.”

[RELATED: IBM Earnings: Red Hat, Hybrid Cloud, Consulting And Kyndryl Fuel Growth]

He continued: “We think and we believe—and the past couple of quarters have borne this out—that demand for technology is going to stay four or five points above. Even if GDP falls too flat, or there’s a quick recession or if it’s a very slight recession, we see demand staying strong and continuing. Now, I’ll acknowledge if we have something much more catastrophic, that’s different. But for all the scenarios that we do outline and we do look at, we see that demand is going to continue in a growth phase for the foreseeable future.”

IBM reported $14.2 billion in revenue, an 11 percent growth year over year.

Mark Wyllie, CEO of Boca Raton, Fla.-based IBM partner Flagship Solutions Group, told CRN that his company is investing in building skills around IBM’s cybersecurity, AI operations (AIOps) and automation offerings.

“Those are areas that are resonating with customers on their hybrid cloud journey,” Wyllie said.

At least two investment banks gave positive views on the Armonk, N.Y.-based tech giant’s future in reports issued Wednesday.

“We continue to view IBM as facilitating adoption of hybrid cloud architectures, leveraging an existing mission-critical customer base and acquired assets,” according to a report by Credit Suisse. “As a hybrid-first world progresses and materializes further for enterprise accounts, we view IBM as one of the key strategic enablers of such an IT architecture transformation.”

In a report by Morgan Stanley, the financial institution said “whereas last quarter‘s revenue outperformance was driven primarily by core Infrastructure (i.e. perceived as a lower quality beat), the upside this quarter came from more broad-based upside across all 3 segments, which we believe the market will interpret more positively.”

Comments from Krishna and IBM Chief Financial Officer James Kavanaugh on “a more constructive consulting outlook, bullish software commentary, contributions from a mainframe cycle starting in 2Q, and ELA renewals expected to increase in 2H22” give Morgan Stanley “a positive setup heading into mid-year.”

The report continued: “And in a market defined by increased volatility and uncertainty, we believe this dynamic coupled with IBM‘s more defensible profile (50%+ recurring revenue) sets IBM up to outperform the rest of our Hardware coverage, which remains more susceptible to potential budget cuts as the macro becomes more challenging.”

Morgan Stanley’s survey of chief information officers “points to overall IT market growth in excess of the 10-year pre-COVID average,” according to the report.

Here’s more of what Krishna had to say on IBM’s earnings call.

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