IBM Finally Returns To Growth, But It’s Not All Good News

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

For the first time in 23 quarters sales at IBM have risen, but a quarterly loss and stagnant forecast blunts the news

IBM has reported mixed financial results for full year 2017 after the tech giant posted its first rise in quarterly revenues for over five years.

But the good news about the revenue rise was blunted by a quarterly net loss and a warning of tough times ahead for the firm.

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
IBM CEO Rometty

Mixed Results

IBM’s financials for its fourth quarter and year end reveal mixed results.

The good news was that the company’s revenue finally rose in the latest fourth quarter. This is the first year-over-year increase since the first quarter of 2012, just after Rometty became CEO.

For the fourth quarter ending 31 December, IBM posted a net loss of $1,05bn (£758bn), compared to a net profit of $4501 (£3.2bn) in the same three months a year earlier, mostly because of a one time tax charge of $5.5bn (£3.9bn).

But it was revenues that took the most attention as IBM posted sales of $5.4bn (£3.9bn), up from $5.3bn (£3.8bn) a year earlier.

“Our strategic imperatives revenue again grew at a double-digit rate and now represents 46 percent of our total revenue, and we are pleased with our overall revenue growth in the quarter,” said Ginni Rometty.

“During 2017, we strengthened our position as the leading enterprise cloud provider and established IBM as the blockchain leader for business,” she added. “Looking ahead, we are uniquely positioned to help clients use data and AI to build smarter businesses.”

For the full year IBM posted a net profit of just $5.7bn (£4.1bn), well down on profits of $11.9bn (£8.5bn) for 2016.

Annual revenues were slightly down to $79.1bn (£56.9bn) from $79.9bn (£57.5bn) in 2016.

Stagnant Forecast

But looking ahead IBM warned that a higher tax rate this year would eat into its profit, and IBM’s shares, which had risen by 10 percent so far this year on hopes of a strong turnaround in the company’s fortunes, fell more than 3 percent in extended trading on Thursday, according to Reuters.

However, matters were also not helped by the fact that IBM forecast an operating profit of at least $13.80 per share for 2018, compared with $13.80 in 2017 and market expectations of $13.92, according to Thomson Reuters.

Looking at unit performance, it seems that for the fourth quarter the Cognitive Solutions division saw revenues up 3 percent at $5.4bn; the Global Business Services unit saw a 1 percent rise in revenues to $4.2bn; but the Technology Services & Cloud Platforms unit posted revenues of $9.2bn, down 1 percent.

Finally, the Systems unit posted revenues of $3.3 billion, up 32 percent thanks to growth in IBM Z, Power Systems and storage.

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