International Business Machines (IBM, Financial) and Nokia (NOK, Financial) are trying to transition their businesses toward new technologies. But how are the two companies doing? Let's find out.
IBM's strategies
GTS outsourcing is one of the core franchises of IBM and continues to grow with revenue growth of 2%, driven by large number of new contracts won in 2013 and gross margin expansion.
IBM continues to make investments in key growth areas like mobility, security and cloud which result in a differentiated set of capabilities that complement its clients' systems of record, and showcase the company’s ability to evolve its core franchises.
The company’s gain from the completion of several country closings in the customer care divestiture resulted in healthy profit coupled with the benefit from the past rebalancing actions.
Across the software brands of IBM, software-as-a-service offerings are growing very rapidly. Its SaaS offerings grew by nearly 40% during this quarter.
Brandwise, WebSphere grew 5% at constant currency, led by app server, commerce and mobile solutions. WebSphere growth was primarily driven by both the on-premise and SaaS offerings, with majority of the growth contributed by the former. IBM’s Application Server business delivered impressive growth with a rise in demand for on-premise software driven by mobile and analytics workloads.
IBM in partnership with Apple is believed to develop unique enterprise cloud services, native for iOS and full enterprise-class mobile experience from analytics to cloud storage and data security.
IBM focuses on STG in 2014 to stabilize the profit base and continues to make investments in this business to remain a leader in high-performance, high-end systems.
IBM Apple partnership makes latter a real enterprise player in retail. The partnership is believed to make Apple more Enterprise friendly while IBM extends its value as a systems management partner.
The decline in the sale of IBM servers, mainframes and other hardware products due to product transitions and market disruptions is hurting IBM badly. IBM continues to transform its businesses by focusing on growth areas viz. cloud computing, Big Data analytics, mobile computing and security since it’s facing weaker-than-average industry spending on information technology overall.
IBM is focused on offloading less profitable businesses such as the low-end server unit being sold to Lenovo Group Ltd. for $2.3 billion.
Further, IBM signed a deal with Apple to provide support in developing more than 100 mobile-centric applications for businesses catered to Apple Inc.’s iPhones and iPads to enable workers to do more with the devices than just checking e-mail or using calendars identifying the changing trend of corporate customers increasingly using handheld devices for daily workplace tasks like supply-chain management and human resources functions.
Further, IBM is on a spree of share buyback. This buyback has been continuing for 20 years and has more than halved the number of IBM shares outstanding. IBM has also raised its dividend for the 19th consecutive quarter year and the 11th year in a row of double-digit increases.
Nokia's new businesses
HERE solutions has allowed Nokia to gain a competitive advantage against its peers as it is the industry leader in advanced telematics delivered through the cloud, which is critical as a building block for the next generation of location services; thus, it remains a strategic focus area for its customers. Second, unlike its main competitor, HERE has a very flexible business model that enables HERE to bring the benefits of location intelligence to multiple customers in multiple industries across different operating systems, platforms and screens.
Nokia’s growth opportunity gets even bigger as it has decided to make the right near-time investment to capture the longer-term transformational growth opportunities it sees. Nokia is also investing greatly in the technologies for smart connected cars, cloud-based services to personal mobility and a wide range of device types and location-based analytics for enterprises with utmost focus on R&D that should gear up its growth going forward. Nokia has already started leveraging automation in its map-creation process that should rally its R&D efficiency.
Besides, the company expects to benefit largely from the mobile devices business as Nokia has shipped a large volume of products and the company is now utilizing its industry-leading intellectual property rights primarily to obtain favorable net licensing fees which benefited our cost of sales. Its IPR licensing business also looks very strong with the recent collaboration agreement with HTC that is making payments to Nokia and helping to strengthen its licensing offerings through LTE patent portfolio.
In addition, the company has the option to expand its licensing efforts to cover customers in areas beyond its mobile devices. Nokia also expects to readjust its licensing offers in several ongoing talks and make continuous efforts to expand its reach to new companies who need licenses under its patents.
Conclusion
Finally, it can be said that both Nokia and IBM are moving in the right direction to tap growth. The two companies are focusing on emerging technologies, which will improve their standing for the long run, making them smart investments.
