IBM Sees Signs of Recovery from Software Sales Shortfall
IBM CEO Arvind Krishna acknowledged that the company experienced a 'shortfall' in its second quarter software sales, but expressed confidence in IBM's future prospects.
The shortfall was attributed to a sudden shift by customers towards hardware and cybersecurity-focused software, away from traditional areas of IBM's expertise. This led to a delay in closing deals worth double-digit numbers, which accounted for the majority of the shortfall.
Krishna revealed that about one-third of these delayed deals have since closed, giving him 'a good indication' that this was a case of deferred rather than cancelled business. He emphasized that IBM's core software and infrastructure competencies remain strong, but acknowledged that execution had been an issue in the quarter.
IBM is looking to mitigate future risks by increasing its use of AI to enhance sales and marketing efforts, optimize supply chains, and improve client engagement. Krishna highlighted recent acquisitions such as Red Hat, HashiCorp, and Confluent, which are driving growth in high-margin subscription-based software revenues.