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Earnings

IBM earnings: Still searching for growth

After a rare quarter of revenue growth in the fourth quarter of 2019, IBM revenue fell 3.4%, which has been a steady pattern for Big Blue over the last few years.

IBM logo

IBM's first-quarter earnings are in, and amid the COVID-19 pandemic, they aren't looking rosy.

  • Q1 revenue: $17.6 billion (-3.4% YoY, -19% QoQ, vs. $17.6 billion expected)
  • Q1 earnings: $1.2 billion (-26% YoY, -68% QoQ)
  • Q2 guidance: Like many companies, IBM is no longer providing guidance for the rest of the year due to the impact of COVID-19.

The big number: After a rare quarter of revenue growth in the fourth quarter of 2019, IBM revenue fell 3.4%, which has been a steady pattern for Big Blue over the last few years. Arvind Krishna, IBM's new CEO, told analysts that "you should look at [revenue] growth as the number one most important metric" when evaluating IBM's performance over the next few years, as it attempts to recover from the COVID-19 pandemic.

People are talking: "As you would expect, we saw a noticeable change in client priorities. With that, there was effectively a pause, as clients understandably dealt with their most pressing needs," James Kavanaugh, IBM's chief financial officer, said on the earnings call, describing what the company saw during March.

Opportunities: Red Hat is likely to be an important catalyst for IBM revenue over the next year or so: The subsidiary signed the two biggest deals in its history during the first quarter, Kavanaugh said. Red Hat is well-positioned to help IBM's customers — most of whom are still operating very old-fashioned tech infrastructure — modernize their portfolios.

The other metric Krishna urged analysts to follow was the growth of IBM's hybrid cloud business, which helps companies run software both on public clouds and their own servers. Red Hat's software and services are a key part of IBM's hybrid cloud strategy, and progress here will show how quickly IBM customers are actually updating their infrastructure.

Threats: IBM revenue has been on a steady decline for years, thanks to its legacy software base and inability to cash in on cloud computing — and a global pandemic is not going to help. And while it's not that surprising that IBM reported a drop in customer activity during March, all of its competitors have yet to report their numbers this quarter — they may not have seen as strong a plunge.

Also, IBM currently only has $12 billion in cash and $64.3 billion in debt, although it is still generating cash. "Liquidity is essential," Krishna said. "Without that, nobody is going to survive through this next period."

The power struggle: Like many enterprise technology companies, a significant chunk (60%) of IBM's revenue comes from recurring contracts that were signed months or years ago. But Kavanaugh said that some of its more transactional businesses, such as software, saw customer activity fall off a cliff in March, as corporate customers are putting purchases on hold.

Enterprise software and services tend to have long sales cycles, and people being people, a lot of deals tend to close in the last few weeks of a quarter. So the timing of the outbreak really couldn't have been worse, but if deals that were delayed in the middle of the storm eventually get hammered out in the second or third quarters of the year, the long-term impact on IBM's business might not be as pronounced.

Does Elon Musk make Tesla tech?

Between the massive valuation and the self-driving software, Tesla isn't hard to sell as a tech company. But does that mean that, in 10 years, every car will be tech?

You know what's not tech and is a car company? Volkswagen.

Image: Tesla/Protocol

From disagreements about what "Autopilot" should mean and SolarCity lawsuits to space colonization and Boring Company tunnels, extremely online Tesla CEO Elon Musk and his company stay firmly in the news, giving us all plenty of opportunities to consider whether the company that made electric cars cool counts as tech.

The massive valuation definitely screams tech, as does the company's investment in self-driving software and battery development. But at the end of the day, this might not be enough to convince skeptics that Tesla is anything other than a car company that uses tech. It also raises questions about the role that timeliness plays in calling something tech. In a potential future where EVs are the norm and many run on Tesla's own software — which is well within the realm of possibility — will Tesla lose its claim to a tech pedigree?

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Becca Evans
Becca Evans is a copy editor and producer at Protocol. Previously she edited Carrie Ann Conversations, a wellness and lifestyle publication founded by Carrie Ann Inaba. She's also written for STYLECASTER. Becca lives in Los Angeles.

As President of Alibaba Group, I am often asked, "What is Alibaba doing in the U.S.?"

In fact, most people are not aware we have a business in the U.S. because we are not a U.S. consumer-facing service that people use every day – nor do we want to be. Our consumers – nearly 900 million of them – are located in China.

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J. Michael Evans
Michael Evans leads and executes Alibaba Group's international strategy for globalizing the company and expanding its businesses outside of China.
Protocol | Workplace

Apple isn’t the only tech company spooked by the delta variant

Spooked by rising cases of COVID-19, many tech companies delay their office reopening.

Apple and at least two other Silicon Valley companies have decided to delay their reopenings in response to rising COVID-19 case counts.

Photo: Luis Alvarez via Getty

Apple grabbed headlines this week when it told employees it would delay its office reopening until October or later. But the iPhone maker wasn't alone: At least two other Silicon Valley companies decided to delay their reopenings last week in response to rising COVID-19 case counts.

Both ServiceNow and Pure Storage opted to push back their September return-to-office dates last week, telling employees they can work remotely until at least the end of the year. Other companies may decide to exercise more caution given the current trends.

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Allison Levitsky
Allison Levitsky is a reporter at Protocol covering workplace issues in tech. She previously covered big tech companies and the tech workforce for the Silicon Valley Business Journal. Allison grew up in the Bay Area and graduated from UC Berkeley.
Protocol | Workplace

Half of working parents have felt discriminated against during COVID

A new survey found that working parents at the VP level are more likely to say they've faced discrimination at work than their lower-level counterparts.

A new survey looks at discrimination faced by working parents during the pandemic.

Photo: d3sign/Getty Images

The toll COVID-19 has taken on working parents — particularly working moms — is, by now, well-documented. The impact for parents in low-wage jobs has been particularly devastating.

But a new survey, shared exclusively with Protocol, finds that among parents who kept their jobs through the pandemic, people who hold more senior positions are actually more likely to say they faced discrimination at work than their lower-level colleagues.

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Issie Lapowsky

Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.

Protocol | Enterprise

Alphabet goes deep into industrial robotic software with Intrinsic

If it succeeds, the gambit could help support Google Cloud's lofty ambitions in the manufacturing sector.

Alphabet is aiming to make advanced robotic technology affordable to customers.

Photo: Getty Images

Alphabet launched a new division Friday called Intrinsic, which will focus on building software for industrial robots, per a blog post. The move plunges the tech giant deeper into a sector that's in the midst of a major wave of digitization.

The goal of Intrinsic is to "give industrial robots the ability to sense, learn, and automatically make adjustments as they're completing tasks, so they work in a wider range of settings and applications," CEO Wendy Tan-White wrote in the post.

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Joe Williams

Joe Williams is a senior reporter at Protocol covering enterprise software, including industry giants like Salesforce, Microsoft, IBM and Oracle. He previously covered emerging technology for Business Insider. Joe can be reached at JWilliams@Protocol.com. To share information confidentially, he can also be contacted on a non-work device via Signal (+1-309-265-6120) or JPW53189@protonmail.com.

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