IBM Reports Growth For The First Time in 22 Quarters

Jan 20, 2018, 00:45
IBM Reports Growth For The First Time in 22 Quarters

Revenue from strategic imperatives made up 49% of the total in the quarter, edging toward that point at which sales of the higher-growth offerings will outweigh the rest of IBM, presumably allowing for faster growth overall.

IBM expects the seasonally strong fourth quarter to produce between $2.8 billion and $2.9 billion more revenue than the third quarter.

Global Business Services, the unit undergoing a shakeup, logged revenues of $4.2bn, a one per cent increase, or two per cent dip when adjusting for currency.

IBM has announced its Q4 results for 2017 which sees the company report growth for the first time in 22 quarters with its revenue up 4 per cent to US$22.5bn.

Earnings, excluding some items, were $5.18 a share in the period ended December 31, compared with the average analyst estimate of $5.17.

For the full year of 2017, IBM came up with $13.80 in earnings per share, excluding certain items, according to. The company has produced $8.65 per share through the first three quarters of 2017, so it needs at least $5.15 per share in the fourth quarter to hit its target.

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IBM's cloud revenue for the full year was up 24 percent year over year to $17 billion.

Analysts expected some growth in revenue during the fourth quarter to be generated from sales of the z14 mainframe computer, and that took place during the entire quarter. Each new IBM mainframe creates a sales spike as customers upgrade. That is one penny short of analyst expectations.

Helping the cause are IBM's strategic imperatives.

IBM has been moving away from its shrinking hardware and software businesses to what it calls "strategic imperatives", which includes the contribution of cloud computing - where companies use a remote network of data centers instead of their own hardware to cut costs.

IBM went with revenue declining on a year over year basis. This segment includes things like the much-hyped IBM Watson suite of AI-ish software.

Cloud revenue makes up a significant chunk of that strategic imperatives revenue. Global business services revenues ticked slightly higher to $4.15 billion, while technology services and cloud platforms revenue slipped slightly to $9.2 billion from $9.3 billion a year ago. During 2017, capital expenditures at IBM were $3.31 billion, which was 11% year over year. Revenue has been sliding at IBM. This is compared to analyst expectations of $78.62 billion. Anything less will be a disaster for the stock.

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This was mainly due to a gloomy margins outlook for IBM for this year.

"We've been doing a lot of heavy lifting to reinvent our business, and we're entering 2018 with a stronger revenue profile than a year ago", said incoming CFO James Kavanaugh.

"This quarter was another important step in the right direction with 2018 a major prove me year for IBM to show the turnaround story is viable, which we believe it is, albeit at a snail-like pace", GBH Insights analyst Daniel Ives said.

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen.

IBM shares were down 3.4% at $163.40 in extended trading. The Motley Fool has a disclosure policy.

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