IBM Shares Tumble As Q4 Revenue Slide Mars Solid Earnings

Joanna Estrada
January 23, 2021

As part of the latest push to turn around business, IBM plans to separate a major part of its information-technology services operations, a roughly $19 billion a year business. "Our revenue growth was also impacted by IBM-specific headwinds of our product cycle".

IBM Corp. beat analysts' expectations today with fourth-quarter earnings of $2.07 per share, 28 cents better than the $1.79 that was expected, but growth continues to be elusive.

"Q4 will be a messy (and tough revenue) quarter, 2021 is a transition year with poor revenue growth and FCF, and investors are likely to sit on their hands until more details on the spin-out", Sacconaghi wrote.

IBM on Thursday reported a 6.5% year on year fall in revenues in the fourth-quarter to $20.37 billion, below the $20.67 billion analysts polled by Refinitiv had expected.

Under Krishna's direction, IBM is in the process of peeling off its IT infrastructure services unit, which is comprised of its managed infrastructure services other than hybrid cloud, into a new company by the end of this year.

IBM said revenues at Red Hat, which it acquired for $34bn in 2018, were up 18pc for the year and Cloud and Cognitive Software, the division that houses Red Hat, saw a slight bump in its revenue from $22.8bn to $23.3bn. "Revenue fell 6% on an annualized basis, the fourth consecutive quarter of declines".

IBM attempted to divert investors' and analysts attention away from its current numbers with two-year forecasts and a focus on adjusted free cash flow, but it did not seem to work. It's fake cloud, and it's not working for you or your customers.

While 2020 was an odd year, one thing remained the same: IBM earnings and sales continued to shrink.

"Let's compare those figures to IBM", Royston said.

Mr. Krishna said IBM is encouraging more risk-taking to drive growth - and ensuring a higher tolerance for failure across the business. He has also worked for 26 years at Infoworld and Computerworld covering enterprise class products and technologies from larger IT companies including IBM and Microsoft, as well as serving as Editor of Redmond for three years overseeing that magazine's editorial content. Executives said the Red Hat Inc. acquisition is paying dividends in that market, with growth of 18% in 2020.

For the year, IBM adjusted earnings fell to $8.67 a share from $12.81 a share in 2019, and revenue dropped to $73.62 billion from $77.15 billion.

Krishna assured analysts that growth is just around the corner.

"In 2020 we increased investment in our business across R&D and capex, and since October, announced the acquisition of seven companies focused on hybrid cloud and AI", CFO James Kavanaugh said.

Choosing to accentuate the positive, Krishna said there remains a rich opportunity to be pursued in the hybrid cloud market, a market he believes is worth $1 trillion and where only 25% of workloads have moved so far.

Other reports by Click Lancashire

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