Last Week Highlights the No. 1 Key to IBM Corp's Future Growth

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Credit: IBM

The good news just keeps coming for shareholders of International Business Machines Corporation .

It all started last Tuesday when, thanks in part to leading the pack in Gartner's 2014 SIEM report ranking 15 top vendors in the field of security analysis, IBM's nearly 3% pop led the Dow Jones Industrial Average  higher in a broad-based rally, 

The following day, IBM rose another 1% after Lenovo  Chief Executive Officer Yang Yuanqing assured investors he still expected to close on the acquisition of IBM's low-end server business by the end of this year, citing "good progress in obtaining approvals for the deals." Sure enough, early Friday the Chinese Ministry of Commerce's anti-monopoly bureau approved acquisition, which had faced skepticism from investors regarding whether security concerns between the U.S. and Chinese governments might cause the $2.3 billion deal to fall through.

1 key market for IBM's future
But for IBM investors in particular, these events highlight the importance of one key aspect of the tech giant's aspirations for future growth: Its increasing embrace of cloud computing.

To be sure, while Lenovo is eager to become one of the few remaining significant games in town for entry level servers, completion of the deal is just as necessary for IBM as part of its recent efforts to shed businesses which don't line up with its largely cloud-based strategic vision. 

What's more, as IBM enjoys its place as the top-ranked security analysis firm from Gartner, you can bet it will work to translate that success over to its cloud offerings going forward. And as fellow Fool Anders Bylund also pointed out earlier this week, don't forget IBM made solid progress improving its position in Gartner's separate cloud infrastructure as a service rankings earlier this spring.

Luckily for IBM investors, those efforts are already bearing fruit: Even as IBM's consolidated first quarter revenue declined 4% year-over-year to $22.5 billion, cloud revenue rose 50% over the same period. Within that segment, cloud products delivered as a service reached an annual revenue run rate of $2.3 billion in Q1, or more than double its run rate over the same year-ago period -- a strong start toward IBM's goal of deriving $7 billion in revenue by next year from cloud-related sales of hardware, software, and services.

IBM is hard at work in the cloud
Moreover, last week's broader events overshadowed no less than five other cloud-centric announcements from IBM. The first three came on Tuesday, including a new Big Data analytics service now available on its Cloud marketplace, a 10-year agreement with Banco Popular to outsource technology infrastructure and private cloud to IBM, and a five-year services agreement to help business billing and enterprise management specialist Qvantel deploy a new cloud-based IT model.

The remaining two arrived last Wednesday, first in the form of a new cloud-based enterprise social software offering called IBM Connections 5, then with the delivery of an IBM Enterprise Cloud System to New York-based IT specialist Vissensa.

Taken apart from one another, these announcements might not seem like significant contributors to the $190 billion tech behemoth's results. Collectively, however, they should reassure IBM investors that their company is busy shuffling for market share in the burgeoning cloud market. Because over the long-term, it's increasingly clear the cloud will prove crucial to IBM's success.

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The article Last Week Highlights the No. 1 Key to IBM Corp's Future Growth originally appeared on

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Gartner. The Motley Fool owns shares of International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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