New Hat covers New Problems without IBM

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IBM says its Red Hat unit generated $ 987 million in revenue for the latest quarter on a normalized basis.

Photo:

John Locher / Associated Press

If nothing else exists, it is likely that Red Hat will never feel that their new adoptive parent can invoke them.

IBM


IBM -0.13%

He bought the software maker for $ 33 billion a year ago. The biggest M&A discussion made by the tech giant 108 years of age is the same as the company 's big breakthrough in re – shaping its success in a cloud corporated world of technology. IBM completed the discussion in early July, which indicated its third quarter results on Wednesday afternoon the first to incorporate Red Hat.

The newly established company succeeded in being on the bright spot in these results. IBM said its Red Hat unit generated $ 987 million in revenue for the period on a normalized basis, reflecting 19% growth for the business from a year earlier. That growth rate is better than Red Hat saw on its own in its final four quarters.

IBM executives have no enthusiasm for the business: IBM's financial chief Red Hat cited more than 50 times t

Jim Kavanaugh

the company's earnings call Wednesday.

But the results also showed – quickly – not just so much Red Hat can do.

IBM's overall income exceeded 4% to $ 18.03 billion in the quarter, falling below Wall Street estimates and as a result of the slowdown in global technology services, the company's largest business unit.

IBM also reported the lowest quarterly income in 21 years, according to data from S&P Global Market Information IBM's stock was a relatively strong performer this year, partly due to expectations Red Hat could help to reach the company. This year the stock was up 25% this year before the report, but it fell 5.5% on Thursday.

IBM believes that it can revive growth next year, and Red Hat hopes to play a big part in this. But even in an optimistic scenario where Red Hat's revenue growth accelerates to around 20% per year compared to 15% in its most recent fiscal year, it would only account for around 6% of 2020 income, Wall Street's current estimates.

So the Big Blue needs lots of other things to get started. And so on.

Write Dan Gallagher at dan.gallagher@wsj.com

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