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IBM's Krishna Says Company is in Virtuous Cycle

The chairman and CEO of tech giant discusses Big Blue's consulting focus with Jim Cramer.

IBM  (IBM) - Get International Business Machines (IBM) Report now makes much of its revenue in consulting and partnering with companies that weren’t even in the imagination stage when Big Blue began more than a century ago.

IBM chairman and CEO Arvind Krishna told Jim Cramer on a recent episode of "Mad Money" that the company is focusing on technology consulting. In the case of Delta Air Lines  (DAL) - Get Delta Air Lines, Inc. Report, IBM was able to provide a hybrid cloud solution that will move 90% of Delta's current applications to the cloud, powered by Amazon Web Services  (AMZN) - Get Amazon.com, Inc. Report, RedHat and IBM's own applications.

On Real Money, Bruce Kamich recently looked at IBM's chart performance. "In the updated daily bar chart of IBM ... we can see that the shares have improved since our Sept. 22 review and now trade above the bottoming 50-day moving average line. IBM survived the test of the 200-day line."

IBM doesn't go it alone, Krishna told Cramer. The company partners with the best in the business including Microsoft  (MSFT) - Get Microsoft Corporation (MSFT) Report, Amazon, Salesforce  (CRM) - Get salesforce.com, inc. Report and Box  (BOX) - Get Box, Inc. Class A Report, just to name a few. IBM is an "ecosystem," he said, so even if they share revenue in some areas, there will always be opportunity for IBM.

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IBM utilizes cash to help drive its success, Krishna said. The company has entered into a virtuous cycle, one where free cash flow provides the revenue needed to drive growth, which in turn provides even more free cash flow. The company expects to generate $35 billion in free cash flow over the next three years. As of the first week of October, IBM stock was trading up about 14% over the past year.

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