Is IBM Failing in the Cloud?

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IBM’s (NYSE:IBM)¬†winning streak ran into a problem this quarter as the revenue decreased due to hardware problems and economic uncertainty. On Thursday, the company stated a 1 percent dip in profit and a 5 percent drop in revenue, which caused some investors concern. The stock dropped more than 8 percent on Friday.

IBM has a reputation for dodging problems that affect others in the industry, and this has normally installed confidence in investors. Now though some analysts are speculating that the technology giant may be having problems due to cloud computing.

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IBM is still used by many of the world’s top corporations and government entities, but the company may no longer have all the technology that these entities want to purchase. Some newer companies including Saleforce.com (NYSE:CRM) who are renting cloud computing power are growing much faster than IBM is.

Longterm technology analyst Rick Sherlund said that things are becoming much tougher and that growth has slowed in the past year. According to the Wall Street Journal, Sherlund also thinks that companies such as Saleforce.com are providing serious competition to IBM and other tech giants.

In the past, IBM earned a lot of revenue from selling software packages to companies or use outsourcing to take over lines of business. However, nowadays companies do not want to pay for extensive hardware and software systems. Instead, they want to rent computer and software systems.

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IBM is not just taking it though. They are trying to adapt by purchasing more modern software and switching to mobile computing as well as cloud computing. Unfortunately for a larger company such as IBM, sales of new technology may not be impressive, especially compared to the costs of adaptation. IBM and other large tech companies may continue to have problems as business models change.

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