International Business Machines Corp. (IBM:US), the largest technology services provider, said its business-analytics unit will add $4 billion more in revenue than expected.
The company raised its goal for annual sales from analyzing business data to $20 billion by 2015, from an earlier $16 billion, Chief Executive Officer Ginni Rometty told investors at a presentation today. Customers are increasingly relying on analytics to study the flood of data coursing through their businesses, she said. Revenue from the category in 2010, when IBM set the first goal, was about $10 billion.
“Data will be the basis of competitive advantage for every company, for every industry, for the next decade” Rometty said, based on her meetings with 500 chief executives of IBM clients last year.
In 2012, IBM’s business-analytics revenue grew 13 percent, the company has said. Raising its sales goal for the analytics segment could help ease investor concerns about the company’s growth as a whole. Total annual revenue (IBM:US) at the Armonk, New York- based company is up less than 1 percent since 2008.
IBM has divested $15 billion in revenue over the past 10 years, Rometty said.
“If we had not, we would be a much larger company,” she said. “Potentially a faster-growing company. But we would be a way lesser-margin company.”
Instead of focusing on sales, the company has emphasized gains in earnings per share (IBM:US). IBM has added higher-margin software that handles data analysis and continued its shift away from less-profitable hardware and services contracts. IBM expects to generate more than half of its profit from software by 2015.
IBM has been thinking of ways to drive better performance from its businesses with lower margins, including some labor- based services, legacy application services and its industry- standard computer business, Chief Financial Officer Mark Loughridge said.
Since 2005, IBM has spent more than $16 billion on 35 acquisitions (IBM:US) to boost its analytics capabilities. Tealeaf Technology, which IBM bought in June, helps chief marketing officers analyze customer behavior, for example. Star Analytics Inc., which IBM said it would buy this month, integrates business information and helps sort out what’s important, eliminating time-consuming steps for data analysis.
IBM also has developed some of its own products with an analytics focus. The technology behind Watson, the computer that beat humans on “Jeopardy!” in 2011, evolved into several tools for health-care providers assessing cancer patients. At today’s meeting, taking place at IBM’s research lab in San Jose, California, Watson devised some of the food for the investors’ lunch, said John Kelly, IBM’s head of research.
IBM’s shares fell less than 1 percent to $200.83 at the New York close. They have risen 4.8 percent this year, compared with a 6.2 percent gain in the Standard & Poor’s 500 index.
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