IBM (NYSE: IBM) recently announced mixed results for its second-quarter. The company continues to grow through acquisitions and recently bought Apptio, a Unicorn player whose founder I had spoken with a few years ago.
IBM’s Financials
Revenues for the second quarter grew 0.4% to $15.48 billion, falling short of the Street’s estimates of $15.58 billion. Adjusted earnings of $2.18 a share was ahead of the $2.01 that the market had estimated.
By segment, revenues from Software that includes Hybrid Platform & Solutions and Transaction Processing grew 8% to $6.6 billion. Revenue from Consulting including Business Transformation, Technology Consulting, and Application Operations grew 6% to $5 billion. Revenue from Infrastructure including Hybrid Infrastructure and Infrastructure Support fell 14% to $3.6 billion.
IBM did not provide any outlook for the second quarter or the year. It did, however, mention that it expected constant currency revenue growth at the low end of the mid-single digit range.
IBM’s Partnerships
Recently, IBM announced its partnership with Truist, accelerating technology innovation in banking while simultaneously exploring the abilities of Quantum Computing in the banking industry. The partnership will focus on developing Truist’s internal expertise in quantum computing, allowing the bank to take advantage of the technology’s future potential with access to IBM’s quantum computing systems, deep expertise, and enablement resources.
IBM’s $4.6B Acquisition of Apptio
IBM also announced its acquisition of Washington-based Apptio Inc, that will allow IBM to accelerate its advancement of its IT capabilities, while enabling enterprise leaders to deliver enhanced business value across technology investments. Financial and operational IT management and optimization software and services provider Apptio has a following of over 1,500 clients, including major tech companies such as Amazon, Microsoft, and Google. Its core offerings help customers manage their cloud strategy.
The $4.6 billion acquisition will drive growth in areas including automation, RedHat, and IBM Consulting, in addition to a stronger partnership with other systems integrators like Accenture, KPMG, Deloitte, and EY. With Apptio’s anonymized FinOps data, IBM will also gain the ability to deliver new innovation by augmenting Watson.
Apptio has had quite a roller coaster ride so far. Prior to IBM’s acquisition, Apptio was acquired by private equity firm Vista Equity Partners for an estimated $1.94 billion. Vista had acquired Apptio in 2019 after Apptio had been trading publicly since 2016. Before Apptio went public, it had raised $261 million in 8 rounds of funding led by SharesPost Investment Management, Employee Stock Option Fund, 137 Ventures, Madrona, T. Rowe Price, Greylock, Andreessen Horowitz, Shasta Ventures, The Hillman Group and Janus Capital Group. In September 2016, Apptio went public and raised $96 million by offering 6 million shares at $16 each, securing a valuation of $610 million.
IBM’s stock is currently trading at $138.38 with a market capitalization of $125.7 billion. It touched a 52-week high of $153.21 in November last year and a 52-week low of $115.55 in September last year.
Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.
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