IBM Shows Positive Revenue Growth for First Time in Six Years

Doris Richards
January 20, 2018

This improvement marks the first quarter IBM has reported revenue growth in more than five years.

On an adjusted basis, IBM had profit of $5.18 a share, a penny more than the $5.17 expected by analysts, according to Thomson Reuters.

Shares of IBM (IBM) fell Friday after the tech giant reported fourth-quarter results that beat views and broke a almost six-year string of revenue declines but also raised concerns about future profit growth. In all, the company reported a quarterly loss of $1.05 billion, or $1.14 a share, compared with profit of $4.5 billion, or $4.72 a share, a year earlier.

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

Revenue from security soared 132% in Q4, while mobile revenue grew 23%, IBM said. The sale of industrial-strength computers jumped 32 per cent year-on-year, to $3.33 billion, and cloud rose 30 per cent, to $5.5bn.

Jim Kavanaugh, a 21-year IBM veteran who took the position of CFO last week, in the Q4 earnings call told investors Big Blue was becoming more efficient with scale, which in turn yielded greater profitability.

Moor Insights Principal Analyst Patrick Moorhead said the new-gen business upward-and-to-the-right movement is the key takeaway from the January 18 report.

The company attributed stronger than expected growth in cloud computing and demand for IT security software and services for its performance. The company will have an annual effective tax rate of 16 percent, plus or minus 2%, inclusive of the tax reform, Kavanaugh said.

"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".


Several analysts pointed to the traditionally cyclical nature of mainframe revenues, which tend to surge for 2-4 quarters after the launch of a new launch before falling off.

Growth in the quarter was largely organic, Schroeter said, adding "in 2018, we'll maintain a high level of investment". These strategic imperative businesses saw fourth quarter revenue of $11.1 billion, up 17 percent from a year ago.

Analysts forecast that International Business Machines Corp.

Although some of its competitors have pared down or divested their services organizations in recent years, executives said its own services continue to be a major generator of new business, particularly for IBM's cloud offerings.

"We're moving our whole services platform onto the IBM cloud and that's going to deliver us the scale we need to deliver SaaS as efficiently as possible", he said.

In the fourth quarter, IBM acquired consulting agency Vivant Digital, settled a patent lawsuit with Priceline and said Daimler AG, JPMorgan Chase and Samsung are collaborating with the company on quantum computing technology.

Cognitive Solutions (includes solutions software and transaction processing software) - revenues of $5.4 billion, up 3 percent (flat adjusting for currency), driven by security and transaction processing software.

"The strategic imperatives segment remains the main fuel in IBM's diesel engine heading into 2018 as it represents roughly 50% of revenue and is growing with double digits", Ives wrote, "thus helping neutralize some of the massive headwinds on its traditional mainframe hardware business".

Other reports by Iphone Fresh

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