The Strong US Dollar Continued to Hinder IBM in 4Q15
Geography and the US Dollar Weighed Heavily on IBM in 4Q15
Strong US dollar continued to impact IBM’s revenue growth
In the previous part of this series, we discussed IBM’s (IBM) performance in fiscal 4Q15. Its revenues of $22.1 billion fell 8.5% on a year-over-year (or YoY) basis. On a constant currency basis, this was a fall of 2%.
IBM once again blamed the strengthening of the US dollar (UUP) against major currencies for its lack of revenue growth in fiscal 4Q15.
Approximately 6 out of the 9 percentage points of the company’s fall in revenue were due to a stronger dollar, as the above chart shows.
IBM derives more than half of its revenue from outside the United States, which is why the strengthening of the US dollar (UUP) against major currencies impacted its revenue growth in fiscal 4Q15.
Key factors apart from the dollar that impacted IBM’s revenue grow
Apart from IBM, Oracle (ORCL) and Microsoft (MSFT), too, generate more than half of their revenues from outside the United States. As a result, the strong US dollar is a bane for them. In fact, the strong US dollar is bad news for the entire technology sector, as the majority of technology companies derive most of their revenues from outside the United States.
In IBM’s 4Q15 pre-earnings series, we highlighted the key factors that haunted IBM’s revenue growth. They are:
Strengthening of the US dollar (UUP) against major currencies
Slow growth in the BRIC countries: Brazil (EWZ), Russia (RSX), India (EPI), and China
Sluggishness in the software sector as companies are increasingly turning toward cloud offerings
Divestitures of IBM’s x86 server and semiconductor technologies in 2014
We have already discussed the impact of the US dollar on IBM’s growth. We’ll discuss the rest of these factors in later parts of the series.
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