International Business Machines Corp. (NYSE:IBM) plans to grow its internal income next year. Sources say the tech giant aims to pull in $1 billion in revenue via its cloud systems arm SoftLayer in 2016.
SoftLayer operates as a dedicated server, hosting and cloud computing component within IBM. The division has made modest revenues for the company since its acquisition two years ago. It now appears as though IBM wants to start taking full advantage of the $2 billion investment.
IBM pushes SoftLayer for $1 billion
The cloud systems entity made a turnover of $335 million before its joined IBM 2013. IBM’s new $1 billion price target for SoftLayer would represent around a 25 percent increase from what it is expected to make in 2015.
The goal hints at IBM’s anxiety to grow its cloud business as well as its stake in the market. The firm’s other offers are currently struggling to hold consumer interest. On the other hand, the 104 year-old company could find salvation in the growing demand and adoption of cloud systems. IBM has seen three and a half years of straight decreases in sales. It has recently begun making efforts to transition into a more software and cloud-intense company.
At a conference report in October, CFO Martin Schroeter said the income raked in by SoftLayer rose by a double digit percentage in the third quarter. It isn’t clear if the cloud component’s earnings consist only of cloud infrastructure services, or include added products and other services as well.
IBM’s cloud revenue stood at a total $9.4 billion for the 12 months leading up to Sept. 30.
“This puts IBM at the forefront of the cloud market,” Ian Colley relayed, spokesman at IBM(NYSE:IBM). $7 billion of last year’s final $92.8 billion income came from software and cloud services.
SoftLayer is one of IBM’s best hopes at growing its cloud business into something truly formidable. Its acquisition is 2013 was meant to better allow the company to compete with big-time cloud giants like Microsoft and Amazon.com. Up to 15 data centers will be built over the next few years. IBM said it plans to spend $1.2 billion on these builds.
Cloud growth may be hard for IBM
Analysts predict that long-standing cloud giants will also greatly expand their market share over the next few years. The likes of Amazon.com, Microsoft and Google plan to up their competition in 2016 and beyond, a report suggested. As a result, this would force those seeking to break into the cloud segment to seek other revenue streams.
“IBM, VMware, and the other public cloud providers had better take notice and start reporting clear, distinct revenue from public cloud platform services. The must stop lumping their public clouds with consulting, implementation and on-premises private-cloud-technology sales.”
IBM(NYSE:IBM) recently announced that it has built new ties with Verizon, Equinix, Digital Realty, and many other. The deals will expand its cloud services in order to help promote the adoption of cloud by business and private users.