At the conclusion of last year’s IBM Think conference in Orlando, IBM Corp. Chief Executive Officer Arvind Krishna made a prediction. It was a time of huge impact when it came to the intersection of cloud, artificial intelligence and quantum, and a significant transformation was on the way, he noted.

“It’s a massive moment of technological advancement. We are going to see an incredible inflection point,” he said during his keynote address.

Since last year’s conference, that prediction has played out, as IBM has been seeking to further actionize its product portfolio for business intelligence, powered by AI solutions. It’s easy to forget the history that brought the company to this point, according to theCUBE Research chief analyst Dave Vellante.

“I’ve been following IBM since the early 80s, when the entire industry was IBM. Many people don’t realize the magnitude of IBM’s influence in the history of tech,” Vellante said. “At one point, IBM accounted for 50% of the tech industry’s revenue and two-thirds of its profits. Try to imagine that. It would be like Microsoft having $2-trillion in revenue today. It’s been over a decade that I’ve been this excited about IBM’s prospects.”

The future for IBM will be explored by Vellante and theCUBE Research executive analyst John Furrier during the IBM Think event. Watch our channel for on-demand coverage from theCUBE, SiliconANGLE Media’s livestreaming studio. (* Disclosure below.)

IBM’s financial performance and future prospects

Anchored by software and consulting, IBM posted strong fourth-quarter earnings in January that beat analyst projections. For the year, revenue growth was in line with expectations, and the company exceeded its free cash flow objective, according to Krishna.

“Based on the strength of our portfolio and demonstrated track record of innovation, for 2024 we expect revenue performance in line with our mid-single digit model and about $12 billion in free cash flow,” Krishna said in a release.

In April, the company missed on revenues, saying the miss came from continued high interest rates, currency exchange fluctuations and customer caution. However, the company said it saw rapid growth in the future due to a $6.4 billion acquisition of infrastructure automation firm HashiCorp Inc. It also believes the acquisition will drive growth in strategic areas, such as Red Hat, watsonx, cybersecurity, IT automation and consulting. HashiCorp has more than 4,400 enterprise customers, and 85% of the Fortune 500 use its developer-focused offerings.

“HashiCorp is an accelerant for IBM strategy in terms of giving us a better overall portfolio so more clients want to do business with us,” Krishna said in April.

The company announced in late April that it had entered into a definitive agreement to acquire HashiCorp for $35 per share in cash. It’s a good deal for IBM, according to Furrier.

“I think this will be as good if not better than the Red Hat deal. Mainly because … it’s a big piece of the puzzle. It’s going to give IBM and Red Hat specifically a major element of the stack with Terraform and with Vault, which has secret data stuff in there,” Furrier said on a recent episode of theCUBE Podcast. “They’ve done amazing. Their product will fit. IBM will take the thousands of unmonetized customers and make it great.”

Strategic focus and growth initiatives

IBM’s prospects are compelling right now for several reasons, according to Vellante. Management has the company focused on key areas of hybrid cloud, AI and software, he noted.

“IBM’s consulting business is world class but is now, in my view, complementary to its core technology solutions rather than a services tail that wags the product dog,” Vellante said. “Innovation is front and center, and the Red Hat acquisition has created a key cog in the company’s open-source and ecosystem playbook.”

Finally, the learnings from Watson 1.0 can be an advantage for IBM if leveraged in 2.0 across the portfolio, according to Vellante. The challenge for IBM moving forward is to keep pace with the industry’s innovation engine, which it failed to do in the cloud era, he noted.

“My issue with IBM in the past decade has been its capital allocation strategy. It had been too conservative. This changed with Red Hat and it’s why I like the HashiCorp move and IBM’s other recent M&A,” he said.

Aside from the HashiCorp acquisition, the company has remained busy in other areas over recent months. The company joined with the Linux Foundation in a post-quantum cryptography initiative and announced plans in December 2023 to acquire Software AG’s StreamSets and webMethods application integration platforms for about $2.33 billion in cash.

Moving forward, the company is expected to capitalize on its HashiCorp acquisition. In April, Chief Financial Officer James Kavanaugh noted that only about 20% of the Forbes Global 2000 are HashiCorp customers, and just one-quarter of its customers results in $100,000 in annual recurring revenue.

“We have an opportunity to monetize and upsell their products. It will drive a higher growth profile over time,” he said.

How IBM and its ecosystem is tapping Big Blue’s legacy in research and development to drive innovation for enterprise AI products will be a big focus during the IBM Think event. TheCUBE will provide full coverage of the event to capture all the breaking news and provide analyst-driven commentary. You can follow theCUBE’s demand coverage for firsthand insights.

TheCUBE event livestream

Don’t miss theCUBE’s on-demand coverage of the IBM Think event.

How to watch theCUBE interviews

We offer you various ways to watch theCUBE’s coverage of IBM Think, including theCUBE’s dedicated website and YouTube channel. You can also get all the coverage from this year’s events on SiliconANGLE.

TheCUBE Insights podcast

SiliconANGLE also has podcasts available of archived interview sessions, available on iTunes, Stitcher and Spotify, which you can enjoy while on the go.

SiliconANGLE also has analyst deep dives in our Breaking Analysis podcast, available on iTunes, Stitcher and Spotify.

Guests

During IBM Think, theCUBE analysts will talk with industry professionals about the cutting edge of enterprise AI. Our analyst-led discussions feature thought leaders in data platforms, business intelligence and AI infrastructure. Discover advancements in hybrid cloud architecture, AI operations and quantum computing.

(* Disclosure: TheCUBE is a paid media partner for IBM Think. Neither IBM, the sponsor of theCUBE’s event coverage, nor other sponsors have editorial control over content on theCUBE or SiliconANGLE.)

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