Can Strategic Imperatives Turn IBM Around in Fiscal 1Q16?
BRIC’s troubles have added to IBM’s growth woes
In the previous part of this series, we looked at the vital role the US dollar could play in IBM’s (IBM) upcoming fiscal 1Q16 results. Now let’s see how BRIC plays a substantial role in IBM’s growth.
IBM saw an 11% fall in revenue in the BRIC region in fiscal 4Q15. We weren’t able to analyze it fully since the company didn’t divulge much information about BRIC.
BRIC has been under stress since 2015 for a variety of reasons. Brazil has been having economic troubles for a long time. That became very evident in 2015. Political instability, a corruption scandal (PBR), and a slowdown in China, one of Brazil’s major trading partners, all contributed to Brazil’s troubles. Russia (RSX), a crude oil exporter, was severely hit by the fall in energy prices in 2015 and the downward momentum that continued into the first six weeks of 2016.
Could India offer hope for IBM growth?
The slowing demand in China (FXI) and emerging markets (EEM) has pushed IBM to take extreme steps to boost its operations in China. In early 2016, IBM viewed increasing air pollution in China as a growth avenue to use its cognitive computing to measure and assess pollutants in the air.
IBM’s peer Microsoft (MSFT) is also trying to strengthen its presence in China. It partnered with Baidu (BIDU), China’s dominant search engine, to promote its Windows 10 OS (operating system).
IBM stated that although revenues from China continued to fall in 4Q15, the company experienced a double-digit growth in India and Australia. Also, 4Q15 was the 13th consecutive quarter in which Japan (EWJ) continued to post revenue growth.
India offers some hope for IBM. Data released by India’s CSO (Central Statistics Office) in February 2016 gave insight into India’s economic growth. Measured by GDP, growth is expected to be 7.6% in fiscal 2015–2016. India’s economic fundamentals have remained strong while its BRIC peers have struggled. India is relatively better placed among the BRIC nations, which raises hopes for IBM.
Next, let’s look at what we can expect from IBM’s Strategic Imperatives segment in fiscal 1Q16.
Browse this series on Market Realist: