IBM’s $1 Billion Revenue Target For Cloud In 2016

IBM has set an internal revenue goal for SoftLayer, its cloud-infrastructure business, of $1 billion in 2016, a person with knowledge of the matter said.

That’s an increase of about a quarter from the $700 million to $800 million in revenue the unit is expected to take in this year, said the person, who asked not to be identified because the financial information is still private. SoftLayer, which IBM acquired in 2013, had $335 million in sales the year before the acquisition.

The ambitious goal underscores the urgency of wringing growth from the cloud business -- where software and services are delivered over the Internet -- as customers shun other products from the 104-year-old company. IBM, a latecomer to selling cloud technology, has posted 14 straight quarters of declining revenue during its transition.

The company’s private and public cloud revenue reached $9.4 billion in the 12 months that ended Sept. 30. “This puts IBM at the forefront of the cloud market,” said Ian Colley, a spokesman at IBM, declining to comment on SoftLayer’s revenue. Of the company’s $92.8 billion in revenue for 2014, $7 billion came from cloud services and software.

It’s unclear whether SoftLayer’s revenue includes just infrastructure-as-a-service, or if there are additional software and services included. SoftLayer sales grew at a percentage in the double digits in the third quarter, IBM Chief Financial Officer Martin Schroeter said on an October conference call.

Public Cloud
SoftLayer has proved to be one of the biggest bets for IBM, which paid $2 billion for the business. The move was meant to boost IBM’s public cloud offerings and help it better compete with Amazon.com Inc. and Microsoft Corp. in providing remote computing services. Armonk, New York-based IBM said in 2014 it would spend $1.2 billion to build 15 additional data centers.

Meanwhile, rivals like Amazon, Microsoft and Google Inc. will boost competition in the cloud-computing business next year by cutting prices and driving companies -- including IBM -- to look for other ways to make money, according to Bloomberg Intelligence’s 2016 technology outlook.

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