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IBM reduced its debt to $ 61.4 billion at the end of the year after a peak of $ 73 billion.
Ethan Miller / Getty Images
IBM
posted mixed results for the fourth quarter, with earnings higher than Street’s estimates, but revenues came to light under continued pressure from a soft global economy.
For the quarter, IBM (ticker: IBM) reported revenue of $ 20.4 billion, down 6% (or 8% adjusted for currencies and divestments) and lower than Wall Street analysts’ consensus forecast of $ 20.6 billion. Non-GAAP earnings were $ 2.07 a share, well above Street’s consensus at $ 1.79 a share. On a GAAP basis, the company earned $ 1.41 per share, which equates to more than $ 2 billion in restructuring costs.
The stock fell 7% on Thursday during out-of-hours trading.
The company said it expects full-year 2021 revenue to show positive growth compared to 2020. IBM expects full-year 2021 adjusted cash flow to be between $ 11 billion and $ 12 billion, an increase of $ 10. 8 billion by 2020 and between $ 12 billion and $ 13 billion by 2022. IBM has not provided detailed sales or earnings advice for the full year, or quarterly guidance as standard practice.
IBM has also not provided new details on the planned spin-off of its $ 19 billion managed infrastructure services business, which is expected to be completed by the end of the year.
Chief Financial Officer Jim Kavanaugh said in an interview with Barron’s that sales were slightly below normal seasonality as a result of ongoing economic uncertainty, but earnings per share were above normal seasonality as the company cut costs and reduced debt.
Kavanaugh notes that the company reduced its debt to $ 61.4 billion at the end of the year, after a peak of $ 73 billion following the completion of the Red Hat acquisition. He notes that IBM has a debt of $ 7 billion due in 2021 and that the total should be in the middle of $ 50 billion by the end of this year.
“We have made progress in 2020 by growing our hybrid cloud platform as the foundation for our customers’ digital transformations while facing the broader uncertainty of the macro environment,” CEO Arvind Krishna said in a statement. “The actions we are taking to focus on hybrid cloud and AI will continue, giving us confidence that we can achieve revenue growth in 2021.”
IBM said it had total cloud revenue of $ 7.5 billion in the December quarter, up 10%, while Red Hat revenue was up 19%. GAAP gross margin was 51.7%, while non-GAAP gross margin was 52.5%, both 70 basis points higher than a year earlier. (A basis point in 1 / 100th of a percentage point.) IBM paid off $ 3.9 billion in debt in the last quarter. The company is currently not buying back its own shares.
For the year, total cloud revenues were $ 25 billion, up 20%. Cloud is now 37% of IBM’s total revenue. IBM only says that
Amazon.com
(AMZN) and
Microsoft
(MSFT) have higher reported cloud revenues than IBM.
IBM operates in five segments; here’s a rundown of how they performed in the quarter.
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Cloud and cognitive software revenue was $ 6.8 billion, down 4.5%. That includes 9% growth in cloud and data platforms, led by Red Hat. Revenues from cognitive applications were the same. Transaction processing platform revenue was 24% lower; cloud revenues were up 39%.
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Worldwide business services revenue was $ 4.2 billion, down 2.7%.
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Global technology services revenue was $ 6.6 billion, down 5.5%.
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Systems revenues, including hardware and operating system software, had revenues of $ 2.5 billion, down 17.8%, mainly due to lower hardware sales.
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Worldwide financing income was $ 286 million, down 4.8%.
At the end of Thursday’s trading day, IBM stock was up 1.3% to $ 131.80. The
S&P 500
had risen fractionally.
Write to Eric J. Savitz at [email protected]