IBM reports its first quarterly revenue growth since 2012

Doris Richards
January 20, 2018

That's not unexpected, but it may hurt the company as it's looking to grow its revenue over the next few quarters.

"Over the past several years, we have invested aggressively in technology and our people to reposition IBM", James Kavanaugh, IBM's new chief financial officer, said in a statement that was issued after the company reported its fourth-quarter earnings. That works out to year-over-year growth of about 1.3%, right in line with the average analyst estimate.

International Business Machines Corporation (IBM), better known as IBM, is set to report fourth quarter fiscal 2017 earnings results after the closing bell Thursday.

In a note from GBH Insights after IBM's earnings call, head of technology research analyst Daniel Ives said that IBM's quarterly sales increase means that the company is "showing signs of life".

Excluding items, IBM earned $5.18 per share, also beating analysts' average estimate of $5.17 per share. 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.

Since becoming CEO, Ms. Rometty has struggled to shift IBM from older, shrinking businesses such as selling and maintaining equipment in customers' own facilities to newer ones that promise rapid growth. The shares fell 3.1 per cent to US$163.90 in extended trading.

The fourth quarter will enjoy a major increase in mainframe sales as well, if history is any indication. That spike eventually dissipates, and sales decline once the launch quarter is lapped.

The report marked the second consecutive quarter of flat or growing year-over-year revenue for IBM, and the first time since 2011 IBM has seen two consecutive quarters of flat or positive revenue growth.


Helping the cause are IBM's strategic imperatives. The company is adding clients in cloud computing, z14 mainframes, the blockchain, AI, and cybersecurity.

"Strategic imperative revenue may cross over the core franchises later this year", Mr. Milunovich said, "but there are a lot of industry trends working against a large incumbent like IBM".

Revenue was helped by the weakness of the dollar, since most of IBM's sales are outside the United States.

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

Within Big Blue's strategic imperatives, analytics and cloud had the highest Q4 revenues, coming in at $6.1 billion and $5.5 billion, respectively.

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. IBM is a multinational company, and it actually expects its effective tax rate to rise in 2018.

IBM absolutely needs to post revenue growth for the fourth quarter. It's been more than five years since IBM has managed to produce growth.

Other reports by Iphone Fresh

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