SVP and director of IBM Research, Arvind Krishna speaks on stage at the 2016 Wired Business Conference in New York on June 16, 2016.
Brian Ach | Getty Images
IBM shares fell 6% in extended transactions on Wednesday after the company reported fourth-quarter earnings that did not meet analysts’ expectations.
Here’s how IBM worked:
- Earnings: $ 2.07 per share, adjusted, compared to $ 1.79 per share, as expected by analysts, according to Refinitiv.
- Income: $ 20.37 billion, compared to $ 20.67 billion, as expected by analysts, according to Refinitiv.
Revenues fell 6% on an annualized basis, the fourth consecutive quarter of declines, according to a statement. The company tried to grow in cloud computing and artificial intelligence under new CEO Arvind Krishna, but the decline in revenue also put its predecessor, Ginni Rometty.
IBM’s Cloud and Cognitive software segment, which includes Red Hat, generated revenue of $ 6.84 billion, down about 5% year-on-year. This is less than the FactSet consensus estimate of $ 7.18 billion.
The Global Technology Services unit came in with $ 6.57 billion in revenue, down 6% and below the $ 6.92 billion FactSet consensus.
Global Business Services, which includes consulting, contributed $ 4.17 billion, down about 3% and over the $ 4.08 billion consensus.
Revenues from $ 2.50 billion in systems, from sales of mainframe computers and other hardware, fell 18 percent below the consensus estimate of $ 2.26 billion. The company compares it to a period when systems revenue has grown from a new mainframe.
The company’s earnings per share fell 66%, the sharpest decline in three years, in part due to a $ 2.04 billion pre-tax tax on structural stocks in the quarter.
The company has not issued any official earnings guidance, but said it expects revenue growth in 2021, along with $ 11 billion to $ 12 billion in free cash flow.
During the quarter, IBM announced a plan to split its managed infrastructure services division, which provides website and web-based software hosting, into a separate public company by the end of 2021. The plan was the first major change for IBM since Krishna replaced Rometty as CEO in April. This division is currently part of Global Technology Services.
Also in the quarter, IBM said it had agreed to buy cloud consulting service provider Nordcloud for an undisclosed amount.
Excluding the hourly move, IBM shares have risen about 5% since early 2021, while the S&P 500 has risen about 3% over the same period.
The directors will discuss the results with analysts at a conference call starting at 5:00 p.m., Eastern Time.
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