IBM Beats Expectations For Fourth Quarter

International Business Machines Corp. (NYSE:IBM) has beat analysts’ expectations for its fourth quarter results. The company reported that its fourth-quarter revenue fell 1 percent from the year-earlier period, dropping to $21.8 billion. This was the company’s 19th consecutive quarter of declining revenue. However, this was higher than analysts’ expectations of $21.66 billion in revenue.

Net profit edged up nearly 1 percent to $4.5 billion. The company reported earnings per share of $5.01 compared to the average analyst estimate of $4.88. Chief Financial Officer Martin Schroeter said in an interview, “We feel pretty good about how we’re entering 2017 stronger than we entered 2016.” IBM also beat full-year estimates, posting $13.59 in earnings per share.

Ginni Rometty, CEO of IBM, has sought a turnaround since taking her post in late 2012. IBM has been trying to offset declines in older businesses with sales in newer ones. Its older, slower businesses, such as hardware and services, have been declining annually by percentages in the low teens. IBM has been struggling to cope with the move to cloud computing. The company is now competing with Inc.’s Amazon Web Services for computing power and Inc. for business apps.

Annual revenue in IBM’s newer, faster-growing businesses has risen 14 percent. Those businesses now make up 41 percent of total sales. Ms. Rometty said that the results of the past year established IBM as “the industry’s leading cognitive solutions and cloud platform company.”

IBM said its strategic-imperative businesses have been growing at double-digit percentages. Cloud revenue itself grew 35 percent to $13.7 billion. Rometty said, “More and more clients are choosing the IBM Cloud because of its differentiated capabilities, which are helping to transform industries, such as financial services, airlines and retail.”

IBM has been working hard to build up these new businesses. However, profit growth might remain difficult even if revenue from new businesses grows past that from the old businesses. The company reported that profit fell 11 percent for the full year, dropping to $11.9 billion. IBM’s full-year revenue has declined for the past five years.

IBM shares slid about 2 percent in after-hours trading following the earnings release. During the past year, the company’s share price has rebounded more than 20 percent. However, investors say they want to see more definable revenue streams from new businesses or research efforts.


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