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IBM remains staunch cloud advocate, vows to accelerate transformation

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IBM CEO Virginia Rometty knows where she wants to take her business, but paltry third-quarter earnings are leaving investors wondering if the one-time hardware company can successfully stamp its footprint in the cloud.

IBM reported revenue of $3.5 billion for its third quarter of fiscal 2014, down from $4.1 billion during the same period a year ago. The company leaked $3.4 billion due to discontinued operations, accentuating the strain on Rometty's company to cloud-lift itself into the future.

Rometty opened up to six questions during an event on cybersecurity in Boston, some of which queried the approach IBM is taking to move beyond its lagging hardware sales.

"We don't need more revenue with empty calories," Rometty said. "It's a dangerous thing to talk about your target being just a size without going into what it is."

While Rometty has pushed the evolution of IBM beyond hardware by spinning off the division, the company's cloud ventures aren't impressive enough to assuage investor doubts. IBM reported its cloud services were up by 80 percent, but it would only point to a run rate of $3.1 billion in the sector on the year.

"We are disappointed in our performance. We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry," said Rometty. "While we did not produce the results we expected to achieve, we again performed well in our strategic growth areas -- cloud, data and analytics, security, social and mobile -- where we continue to shift our business. We will accelerate this transformation."

On the same day the cybersecurity conference in Boston turned into an IBM investor meeting, more details of IBM and Apple's joint MobileFirst venture came to light. The companies hope to launch the enterprise app initiative at some point in November, according to Apple CEO Tim Cook, who called the partnership "landmark."

IBM also announced its latest venture into cloud computing on the same day. IBM and Microsoft are teaming to beef up Microsoft Azure cloud servers with middleware, intermediary software that connects operating systems with applications.

"Together we are creating new opportunities to drive innovation in hybrid cloud," said Robert LeBlanc, IBM senior vice president for the Software and Cloud Solutions Group. "This agreement reinforces IBM's strategy in providing open cloud technology for the enterprise. Clients will now gain unprecedented access to IBM's leading middleware and will have an even greater level of choice over the tools that they use to build and deploy their cloud environments."

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