Strong dollar drives IBM lower for 12th quarter in a row

The surging US dollar took another large bite out of IBM's revenues in the latest quarter, though the US tech group claimed an acceleration in its shift towards newer cloud and mobile markets.

At the same time, a company executive defended the IBM's decision to license its technology to computer makers in China so that they could build copies of its products, arguing that this would enable IBM to build a sizeable business there in the long term.

Big Blue's revenues slumped by 12 per cent in the first three months of the year, with the exchange rate accounting for 8 per cent of the fall and divestments of businesses another 4 per cent.

The flat performance, leaving aside these factors, at least showed an improvement from the decline of 2 per cent in underlying revenues that IBM reported for the final three months of last year.

Martin Schroeter, chief financial officer, put the partial recovery down to a 30 per cent jump in revenues of strategically important businesses such as cloud and analytics, around which IBM hopes to rebuild its struggling operations.

Speaking in an interview with the Financial Times, Mr Schroeter also defended IBM's policy of opening its Power chip technology to other companies so that they can build computer systems of their own based on the US company's technology. IBM's licensing of its technology to Chinese competitors comes as many foreign companies worry about being required to give up their intellectual property crown jewels as the price for market access in China.

Licensing Power to Chinese tech companies is the same as licensing it to companies like Google, which uses it to build high-end systems for its own purposes, the IBM executive said.

"This is a long-term [business] model," he said. "Up front, think of it as compression," as a result of IBM selling fewer of its own systems. Eventually, though, IBM hopes to benefit from the much wider uptake of the technology, making money from IP licensing with an approach to business that is "not dissimilar to the ARM structure" - a reference to the UK chip technology company whose designs are used in most smartphones.

The first Power systems made by a Chinese company will go on sale shortly, Mr Schroeter added.

A shift towards higher-margin businesses enabled IBM to beat Wall Street's earnings forecasts in the latest quarter.

Earnings per share, on the pro forma basis on which analysts assess the company, rose 9 per cent to $2.91, or about 10 cents ahead of expectations. On a reported basis, net income fell by 5 per cent to $2.4bn, while earnings per share were flat at $2.44.

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