It looks like IBM’s $34 billion bet on Red Hat is starting to pay off.
A little more than six months after Big Blue closed on its “landmark acquisition,” the tech giant got to report a surprise rise in revenue – the first after five straight quarters in decline.
In its fourth quarter earnings released on Tuesday, the company disclosed a marginal rise of 0.1 percent in revenue to $21.78 billion. Compare that with a drop of nearly 1 percent predicted by analysts on average, according to IBES data from Refinitiv.
IBM got a clear boost from its total cloud revenue of $6.8 billion – up 21 percent – as its CFO Jim Kavanaugh was quick to tout, along with Red Hat’s impact, in a conference call.
“Demand for our cloud capabilities continue to ramp, and we’re starting to realize the synergies across IBM and Red Hat. We see it in our total cloud revenue, and we see it in our combined software revenue growth — up nine percent.
“Red Hat’s normalized revenue was up 24 percent,” he added, “eclipsing $1 billion in a quarter for the first time.”
The Raleigh-based open source software firm remains a standalone entity under IBM’s umbrella.
He also praised IBM’s Cloud Pak series, what IBM has dubbed as “Chapter 2 of the Cloud.”
Released in August last year, it combines IBM’s middleware, artificial intelligence, management and security and Red Hat’s Openshift platform.
It’s yet another example of the “synergy” – a word he used multiple times during the call – of the IBM and Red Hat combination.
Catie Merrill, research analyst at TBR Cloud and Software, said IBM is actively placing OpenShift at the core of its innovations.
“This growth is reason to be optimistic about the IBM Red Hat relationship going forward and how the two plan to surmount the hybrid cloud opportunity from multiple angles,” she told WRAL TechWire in an email.
Looking ahead, some analysts are predicting the go-to market plan for integrated offerings will continue to gain traction, while the innovation engine shows no sign of slowing down with investments in augmenting solutions in areas like security, artificial intelligence, and Internet of Things.
“These developments in combination with a strong suite of services offerings poises IBM to continue its growth trajectory in hybrid cloud and related services,” Nicki Catchpole, senior analyst at TBR Cloud and Software.