IBM benefits from the best estimates, but lacks revenue. He sees growth return in 2021.

Text size

IBM

posted mixed results for the fourth quarter, with profits exceeding Street estimates, but revenues in light of continued pressures from a weak global economy.

For the quarter, IBM (ticker: IBM) reported revenue of $ 20.4 billion, down 6% (or 8% adjusted for currency and divested businesses) and below forecast for the quarter. Wall Street analyst consensus of $ 20.6 billion. Non-GAAP earnings were $ 2.07 per share, well ahead of Street’s consensus of $ 1.79 per share. On a GAAP basis, the company earned $ 1.41 per share, reflecting more than $ 2 billion in restructuring costs.

The stock was down 7% on Thursday after hours.

The company said it expects revenue for the year 2021 to show positive growth over 2020. IBM expects adjusted cash flow for the year 2021 to be between $ 11 billion and $ 12 billion, compared with 10.8 billion dollars in 2020 and between 12 and 13 billion dollars in 2022.. IBM has not provided detailed revenue or profit guidance for the full year and, as a rule, does not provide quarterly guidance.

---

Newsletter Sign-Up

Le Quotidien du Barron

A morning briefing on what you need to know in the day ahead, including exclusive commentary from the editors at Barron’s and MarketWatch.

---

IBM also did not provide new details on the planned split of its $ 19 billion managed infrastructure services business, which is expected to be completed by the end of the year.

CFO Jim Kavanaugh said in an interview with Barron’s this revenue was slightly below normal seasonality due to continued economic uncertainty, but earnings per share were above normal seasonality as the company reduced costs and debt.

Kavanaugh notes that the company reduced its debt to $ 61.4 billion by the end of the year, from a record high of $ 73 billion after the acquisition of Red Hat was completed. He notes that IBM has $ 7 billion in debt maturing in 2021 and is expected to bring the total down to around $ 50 billion by the end of this year.

“We have made progress in 2020 by developing our hybrid cloud platform as the basis for our customers’ digital transformations while dealing with the wider uncertainty of the macro environment,” CEO Arvind Krishna said in a communicated. “The steps we are taking to focus on hybrid cloud and AI will take root, giving us confidence that we can achieve revenue growth in 2021.”

IBM said it achieved total cloud revenue in the December quarter of $ 7.5 billion, up 10%, while Red Hat’s revenue was up 19% . GAAP gross margin was 51.7% while non-GAAP gross margin was 52.5%, both up 70 basis points from the previous year. (One basis point in 1 / 100th of a percentage point.) IBM paid off $ 3.9 billion in debt in the last quarter. The company is not currently buying back its own shares.

For the full year, total cloud revenue exceeded $ 25 billion, up 20%. The cloud now represents 37% of IBM’s global revenue. IBM says that only

Amazon.com

(AMZN) and

Microsoft

(MSFT) have higher reported cloud revenues than IBM.

IBM operates in five segments; Here is a breakdown of their performance during the quarter.

• Cloud and cognitive software revenue was $ 6.8 billion, down 4.5%. This includes 9% growth in cloud and data platforms, led by Red Hat. Revenue from cognitive applications remained stable. Revenues from the transaction processing platform decreased by 24%; cloud revenue increased 39%.

• Global business services revenue reached $ 4.2 billion, down 2.7%.

• Global technology services revenue was $ 6.6 billion, down 5.5%.

• Systems revenue, including operating system hardware and software, posted revenue of $ 2.5 billion, down 17.8%, mainly reflecting lower sales of material.

• Global fundraising revenue reached $ 286 million, down 4.8%.

At the end of Thursday’s trading day, IBM stock was up 1.3% to $ 131.80. the

S&P 500

was slightly up.

Write to Eric J. Savitz at [email protected]