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Technology

IBM shares fall despite first growth in 23 quarters

IBM saw its stock go down more than 4.5 percent after it reported better-than-expected earnings for the fourth quarter and full year of 2017. The company will hold a conference call with analysts at 5 p.m. Eastern time.

  • EPS: Excluding certain items, $5.18 in earnings per share vs. $5.17 in earnings per share as expected by analysts, according to Thomson Reuters.
  • Revenue: $22.5 billion vs. $22.06 billion as expected by analysts, according to Thomson Reuters.

IBM went 22 consecutive quarters with revenue declining on a year over year basis. Now that streak has finally ended — a positive sign as the company faces competition from faster-growing companies like Amazon, Google and Microsoft.

IBM said it took a one-time charge of $5.5 billion as a result of the recent passage of U.S. tax reform. “The charge encompasses several elements, including a tax on accumulated overseas profits and the revaluation of deferred tax assets and liabilities,” the company said in the statement. Including that charge, the tax rate for the quarter was 124 percent, and it was 49 percent for all of 2017.

For the full year of 2017, IBM came up with $13.80 in earnings per share, excluding certain items, according to Thursday’s statement. That’s a penny short of what analysts were expecting, according to Thomson Reuters.

And IBM watchers continue to focus on the company’s strategic initiatives — analytics, cloud, mobile and security — to deliver revenue growth. In the fourth quarter strategic initiatives delivered $11.1 billion in revenue, which represented 49 percent of all revenue. That percentage was 35 percent two years ago.

IBM had $17 billion in cloud revenue in 2017, up 24 percent year over year, with $9.3 billion of that amount delivered as a service.

IBM’s Technology Services and Cloud Platforms revenue fell 1 percent with $9.2 billion in the quarter. The Cognitive Solutions business grew by 3 percent at $5.4 billion in revenue. The Global Business Services unit hit $4.2 billion in revenue, giving it a 1 percent gain.

Analysts had expected some revenue growth in Q4 to come from sales of IBM’s z14 mainframe computer, which happened throughout the entirety of the fourth quarter, and indeed IBM called that out as a highlight of its Systems segment, which produced $3.3 billion in revenue, up 32 percent and above the FactSet estimate of $2.82 billion, according to StreetAccount.

In terms of guidance, for the first quarter of 2018, analysts are expecting revenue growth once more, with a total of $18.42 billion, according to Thomson Reuters. Analysts expect $2.28 in earnings per share, excluding certain items, for the first quarter, according to Thomson Reuters.

Multiple analysts are curious about whether IBM could provide information about changes to its services business. “From our perspective, any signal of a more aggressive restructuring effort (at IBM’s legacy software and services practices) could make us incrementally more constructive on the stock,” Wedbush analysts Moshe Katri and Ariel Hughes wrote in a Thursday note.

In the fourth quarter IBM acquired consulting agency Vivant Digital, settled a patent lawsuit with Priceline.com and said Daimler AG, JPMorgan Chase and Samsung are collaborating with the company on quantum computing technology.

This is breaking news. Please check back for updates.

Programming Notes: For more on IBM, watch “Mad Money” host Jim Cramer’s interview with Martin Schroeter, IBM’s Senior Vice President of Global Markets, tonight at 6 p.m. ET.

Source: Tech CNBC
IBM shares fall despite first growth in 23 quarters

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