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IBM (NYSE: IBM) stock price dropped more than 3% after the third-quarter earnings release as its revenue fell for the third consecutive quarter. Its four out of five business segments reported a huge revenue decline from the year-ago period.
Its systems and global financing revenue plunged at a double-digit rate while revenue from global business services saw a 5% year-over-year decline. Global technology services, which is the largest segment, reported a 4% revenue decline from the prior-year period.
The company has recently announced to make big changes in its largest revenue segment. IBM’s Global technology services segment is composed of infrastructure and cloud services. The company announced to spinoff infrastructure business into a standalone company in order to focus on cloud services.
“Separating the managed infrastructure services business creates a market-leading standalone company and further sharpens our focus on IBM’s open hybrid cloud platform and AI capabilities. This will accelerate our growth strategy and better position IBM to seize the $1 trillion hybrid-cloud opportunities,” says Arvind Krishna, IBM CEO.
Investors returns are declining
IBM stock price has been struggling to generate sustainable growth amid sluggish financial numbers and soft future fundamentals. IBM stock is down 6% so far this year and shares are down almost 20% from an all-time high of $180 a share.
Its dividend growth also slowed sharply in the past few years. Its dividend yield soared above 5% due to the drop in the share price. This year, the company has raised the quarterly dividend by only 0.6%.
Cloud business is outperforming trends
On the positive side, the company’s strategy of aggressively moving the focus towards the cloud industry helped in offsetting massive revenue drop from other business segments.
Its cloud and cognitive software revenue jumped 7% year over year to $5.6 billion. Revenue growth of 17% year over year from Red Hat acquisition added to its cloud & cognitive software revenue.