February 26, 2015 / 2:08 PM / 2 years ago

IBM targets $40 billion in cloud, other growth areas by 2018

3 Min Read

A worker is pictured behind a logo at the IBM stand on the CeBIT computer fair in Hanover February 26, 2011.Tobias Schwarz

(Reuters) - International Business Machines Corp (IBM.N), which ruled computing in the age of the mainframe, is targeting $40 billion in annual revenue from the cloud, big data, security and other growth areas by 2018.

The aggressive target, set by IBM executives at the company's annual investor meeting in New York on Thursday, is the latest step for the technology giant towards emerging, high-margin businesses, and away from its previous strongholds in hardware and servers.

The $40 billion will come from areas which IBM calls its "strategic imperatives," namely cloud, analytics, mobile, social and security software.

That would represent about 44 percent of $90 billion in total revenue that analysts expect from IBM in 2018.

Those businesses generated $25 billion in revenue for IBM last year, or 27 percent of its total $93 billion in sales.

The company said it would shift $4 billion in spending to its "strategic imperatives" this year.

Revenue at IBM has gradually shrunk over the past three years as it sold off its unprofitable units in businesses such as low-end servers, semiconductors and cash registers.

IBM Chief Executive Virginia Rometty has said she was happy to jettison revenue from such unprofitable businesses, which she dubs "empty calories."

IBM revenue has now fallen for the past 11 quarters, while earnings growth has been sporadic.

The company says its long-term plan is to hit "low single-digit" revenue growth and "high single-digit" growth in operating earnings per share. Last year IBM withdrew its long-term plan to hit $20 per share in operating earnings for 2015.

IBM stood by its January forecast of $15.75 to $16.50 in operating earnings per share for 2015. Analysts expect $16.02, on average, according to Thomson Reuters I/B/E/S.

But the company, which gets more than half its revenue from overseas, said the strong U.S. dollar would crimp sales by more than 6 percent this year. In January, it had expected a currency-exchange dent to revenue of 5 percent to 6 percent.

IBM shares were up 0.6 percent at $163.80 on the New York Stock Exchange.

Reporting by Bill Rigby; Editing by Andrew Hay and Bernadette Baum

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