IBM's sales grew for the first time in 5 years

Joanna Estrada
January 21, 2018

Fourth-quarter revenue rose 3.6% to $22.54 billion from a year earlier.

The Blue Chip tech giant, which has suffered 22 straight quarters of revenue declines, is expected to end that streak to start off the new year. IBM's largest and arguably most prominent stakeholder - Warren Buffett's Berkshire Hathaway Inc., which sank more than $10 billion into buying a 5.4% stake in 2011 - sold more than half its holdings previous year.

For the last six years IBM chairman, president and chief executive officer Ginni Rometty has been engaged in a shrinking "by design" program, as part of IBM's refocusing on the cloud, mobile, analytics and cybersecurity, as hardware earnings continue to fall. IBM said it took a one-time charge of US$5.5 billion as a result of the new USA tax law, which weighed on profit.

The company said its fourth quarter sales grew to $22.5 billion, a 4% increase from the $21.8 billion during the same quarter a year earlier.

Helping the cause are IBM's strategic imperatives.

Several factors were key in helping IBM achieve growth in the quarter: sales of industrial-strength computers the company typically refreshes every few years rose 32% to $3.33 billion, while cloud revenue rose 30% to $5.5 billion. Over the trailing-12-month period, strategic imperatives generated 45% of IBM's total revenue and grew by 10%. "If IBM's strategic revenues reach 50 per cent of total revenues, we believe this will help mitigate revenue declines, and potentially allow for very modest revenue growth".

Cloud revenue makes up a significant chunk of that strategic imperatives revenue.

Revenue from the company's cloud business grew by 27% in the fourth quarter. The company generally doesn't provide full-year revenue guidance, but I'd expect management to mention expectations for 2018 revenue if they see it growing.

Global business services delivered revenue of $4.2 billion, up 1 percent.

2018 may be the year that IBM's growth businesses finally surpass its legacy businesses, both in terms of revenue and in terms of being able to fully offset slumping sales. Anything less will be a disaster for the stock. In 2017 the company also launched corresponding software such as "IBM Cloud Private". It's been more than five years since IBM has managed to produce growth. A new CFO could mean IBM has reached a new phase in its years-long effort to reinvent itself.

Other reports by Click Lancashire

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