After Missing Goals, IBM Looks to Get Lean

The IBM Corp. clock was a little off last quarter. For the first time in eight years, Big Blue missed its earnings forecast, casting a momentary over the company’s ambitious growth plans.

CEO Ginni Rometty told investors and analysts this week the company remains healthy, growing and profitable. Further, she said, the company remains on track to hit its five-year growth goal, established by her predecessor, .

While IBM remains confident in its future, it’s not taking the quarterly slip lightly. The response: Big Blue will spend $1 billion in restructuring and job cuts in 2013, as well as divest of underperforming businesses.

“It is important to understand IBM’s long-term model,” said Rometty, as reported by Bloomberg. “We are an innovation company. This means that we pursue continuous transformation.”

The earnings miss isn’t a loss. IBM failed to hit its forecasts – in other words, it didn’t make as much money as it thought it would. A particular weak spot in the portfolio was the hardware business, which saw a 17 percent decline.

Reports continue to circulate that IBM will sell its entry-level Series X servers to . The deal, if it comes to fruition, could fetch IBM between $2.5 billion and $4.5 billion. The deal would reshape the server market, making an overnight player with the likes of Co. and Inc.

IBM continues to pivot toward cloud computing, storage and systems. Its of integrated hardware and software for high-performance data is a big seller. And IBM is aggressive in working with service and providers to enable them with cloud management and applications.

On the periphery, IBM is wading into the mobility market by looking beyond to application enablement. IBM’s vision is to give ISVs, solution providers and end users tools such as WebSphere Cast Iron for creating and maintaining robust, productive and secure mobile applications.

Increasingly, IBM is turning to its channel partners to deliver, create and market integrated solutions that address current and future cloud and analytics needs. At the recent IBM Partner World conference, IBM talked about enabling partners to meet the high-availability hardware, application, storage and security challenges of the market.

If IBM is intent on slimming down to maintain its momentum, it will be reliant on its 100,000-strong network of OEM partners, integrators, solution providers and cloud-services companies.

The question analysts are asking is whether the cloud and service strategy being pushed by IBM can produce enough revenue to replace the decline in hardware and, ultimately, result in incremental growth.

IBM isn’t the only company struggling with this issue. Where IBM is making a difference is its resource, enablement and go-to-market support for cloud, Big Data and data protection strategies. IBM could be a catalyst for accelerated transformation, which will result in growth for it and partners.

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