International Business Machines Corp. (NYSE:IBM), released its financials for Q2 on Tuesday which reported an EPS of $2.97, beating estimates of $2.74. Total revenue of $19.3 billion fell short of estimates of $19.45 billion.
Compared to the previous year, revenue for the quarter declined by just under 5% and net income was down 7%. Although sales were down year-over-year, those numbers are expected to improve over the next two quarters as IBM announced that there would be some large contracts that would start generating sales in the second half.
The majority of the company’s revenue continues to come from its cloud services, which made up 43% of total revenues, comparable to the prior year. Cognitive solutions, which yield the company its largest margins, continue to be the second largest segment with 23% of sales. With another 21% coming from global business services, these three segments make up the vast majority of the company’s overall sales (87%).
One way the company plans to improve its sales and profitability is through its recently introduced IBM Z mainframe which will be able to encrypt all data that is processed on it. The level of encryption that IBM Z offers will make it much more difficult for hackers to extract useful information from. The added difficulty and complexity with a system like that might be enough to deter hackers in the first place. A company with such security measures in place might not be worth the gain, especially when many others will not have similar technologies in place.
Whether IBM Z is worth the effort and the cost for many companies remains to be seen. However, consumers might see value in doing business with banks or other organizations that employ higher levels of safety to keep their information safe.
