Beijing time October 18th morning news, IBM today released the third fiscal year 2016 quarter earnings. The report shows, IBM third quarter revenue of $19 billion 226 million, slightly lower than last year's $19 billion 280 million; net profit of $2 billion 853 million, $2 billion 950 million over the same period last year fell 3.3%; profit from continuing operations was $2 billion 854 million, $2 billion 962 million over the same period last year fell 3.6%. Exceeded Wall Street analysts expected IBM performance in the third quarter, but its after hours stock price is still down nearly 3%.
The following is the main content of the question and answer session:
Morgan Stanley analyst: you this quarter and did not complete what big acquisitions, but cognitive solutions (Note: business solutions include software and software business transaction processing) gross profit margin fell 400 basis points, a decline of 200 basis points, then, with the size of the data center business development, profit service the proportion of income does not ascend?
Schroth: you're right, as we ordinarily in terms of investment reduce, cognitive solutions and services continues to expand the scale of its profit rate will increase, but it is with the scale expansion of cognitive service solutions, we can see that there are so many opportunities, prompted us to continue to invest in this area. We have not reached the scale of the growth rate of more than the growth rate of investment in the extreme, so the decline in profit margins.
UBS analyst: you talked about a lot of Watson and related matters, and put some Watson related advertising, so would you please introduce you to Watson recently held an analyst conference activities? How much income do you have? This part of the revenue is software revenue or as part of the advisory services to get? You mentioned the four or five possible modes of realization of Watson in that conference, which are valid? You also mentioned the Watson as a platform, then you will not consider the Watson to other people's home platform, such as Amazon's AWS cloud services?
Schroth: I first answer the last question: No, Watson will run on IBM's own cloud platform. The progress made by the Watson, you can see some Watson we announced the emergence of the industry and the scene of the news, these are part of our cognitive solutions, including Watson health business, business networking and Watson as a platform for business.
So, now there are more than five kinds of cognitive solutions Watson technology in which the solution has reached eight kinds of Watson content. However, we need to point out that we are still building a new market, and want to Watson health and other business technology and progress will also need a certain time, this is a long-term investment.
Lyon securities analyst: software business in the quarter rose 3%, can you tell me how many of them are natural growth, how much is because of the acquisition? Over the past few quarters of the growth of your software business is negative, this stage is already in the past?
Schroth: software business rose 3%, in fact, this quarter impact of the acquisition on the performance of the business has been weaker than last quarter, and the impact is related to all of our businesses, the quarterly performance acquisitions for the software business do have influence, but not as good as the second quarter effect that significantly, our annual pay business growth good.
Analysts: in the future, the company will continue to increase investment in investment it? Investment in terms of investment if the growth will grow in what areas?
Schroth: we will continue to invest. Our current investment growth rate is not going on? It is possible, but I hope you remember what we did this year to raise IBM all business and productivity growth in the US, to promote the company's services, to be sure, some business profit margins will increase.
So, we will continue to invest in some business in the market, only after a certain level of investment is likely to gain a leading position in the next 90 days we will base for more investment in order to lay better for 2017, but this year we have been pointed out again for the 2017 business layout some investment.
An analyst at Royal Bank of Canada: over the past four quarters, the use of free cash flow largely to buy, so in 2017, you will continue some stock repurchase programs, while only some small acquisitions? What is the use of free cash flow from Future Ltd? In addition, you mentioned that the company in 2017 net income of 90%-100% are converted to free cash flow refers to the GAAP (U.S. GAAP) calculation or Non-GAAP calculation of the data?
Schroth: first of all, we have 90% to 100% of the net income into free cash flow refers to the number of GAAP rules, which is to make everyone understand the most direct calculation method.
As for the use of free cash flow, first of all, to be sure, we will put all the money we used to use, not a lot of Tun cash, the company will invest the company's existing business, will continue to make acquisitions, but also a dividend to shareholders.