SVP and Director at IBM Research Arvind Krishna speaks onstage at the 2016 Wired Business Conference in New York on June 16, 2016.
Brian Ach | Getty Images
IBM shares were up 6% lower in expanded trading on Wednesday after the company reported fourth-quarter sales that fell short of analyst expectations.
This is how IBM performed:
- Merits: Adjusted $ 2.07 per share versus $ 1.79 per share as expected by analysts, Refinitiv said.
- Revenue: $ 20.37 billion, versus $ 20.67 billion as expected by analysts, according to Refinitiv.
Sales were down 6% year-on-year, the fourth consecutive quarter of declines, a statement said. The company has been trying to get bigger in cloud computing and artificial intelligence under new CEO Arvind Krishna, but the sales declines have also been a problem for its predecessor, Ginni Rometty.
IBM’s cloud and cognitive software segment that includes Red Hat generated revenue of $ 6.84 billion, down about 5% year-on-year. That’s lower than FactSet’s consensus estimate of $ 7.18 billion.
The Global Technology Services division had revenue of $ 6.57 billion, down 6% and below the FactSet consensus of $ 6.92 billion.
Global Business Services, including consulting, contributed $ 4.17 billion, down about 3% and more than the consensus of $ 4.08 billion.
System revenues of $ 2.50 billion from sales of mainframe computers and other hardware were down 18% and below the consensus estimate of $ 2.26 billion. The company compares to a period when Systems revenues increased due to a new mainframe.
The company’s earnings per share declined 66%, its sharpest decline in three years, in part due to a $ 2.04 billion pre-tax charge for structural actions in the quarter.
The company has not released formal earnings guidelines, but has 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 divest its Managed Infrastructure Services division, which provides website hosting and web-based software, into a separate publicly traded company by the end of 2021. The plan marked the first major shift for IBM since Krishna replaced Rometty as CEO in April. That division is currently within Global Technology Services.
Also in the quarter, IBM said it had agreed to acquire cloud advisory services provider Nordcloud for an undisclosed amount.
Excluding the out-of-hours move, IBM’s inventory is up about 5% since early 2021, while the S&P 500 is up about 3% over the same period.
Executives will discuss the results with analysts during a conference call starting at 5:00 p.m. Eastern Time.
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