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IBM Finally Returns To Growth, But It's Not All Good News

IBM Finally Returns To Growth, But It's Not All Good News

"According to Street expectations, we're already very low for earnings, . but still, you would have liked to have seen, with the little better revenue trajectory and some positive comments, that would have played in to a nicer number", Pivotal Research analyst Lou Miscioscia said.

Revenue from the company's cloud business grew by 27% in the fourth quarter.

Non-GAAP earnings per share were $5.18 for the quarter ending on December 31, beating analyst expectations by a penny, according to Thomson Reuters.

"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".

What is cloud computing? Executives told analysts on the company's conference call that Watson is doing well in the health, financial services and "internet of things" markets.

The last time IBM reported revenue growth from a prior year was in Q1 2012, which was Ginni Rometty's first as CEO. What matters here is that if IBM's revenues match or beat estimates, it will break a multiyear slide in quarterly revenues on a year-over-year basis.

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 took a one-off charge of more than $5.5 billion due to the recent tax reform law signed in the U.S. The charge includes several elements that include a tax on its overseas profits that have accumulated and that revaluation of its deferred assets and liabilities, said the company in a prepared statement.

For 2018, IBM said it expects revenue growth and margin stabilization.

The strategic imperatives will continue to grow "as we embed cognitive and cloud in more of what we offer", Schroeter said.

IBM (NYSE:IBM) released its latest earnings report after closing bell tonight.

Schroeter said that France, Spain, the Middle East and Africa proved bright spots for IBM in Q4, but the United Kingdom and Germany continued to perform negatively. "What I am interested in with IBM is its "strategic imperatives" which includes cloud, analytics and mobility".

IBM forecast a 2018 operating tax rate of 16%, plus or minus 2 percentage points, compared with a rate of 12% in 2017. The company also posted $5.8 billion in net income for 2017, representing a 51 percent drop from $11.9 billion in 2016.

"During 2017, we strengthened our position as the leading enterprise cloud provider and established IBM as the blockchain leader for business", she added. Adjusted earnings, which IBM calls "operating earnings", are expected to grow to $5.16 per share, up from $5.01 per share in the fourth quarter of 2016. "We have north of a $120 billion backlog in our services business that we're moving to the cloud", Schroeter said. In the quarter, revenues from analytics increased 9 percent (up 6 percent adjusting for currency).

Systems revenue was $3.3bn, a 32 per cent increase driven by strong System Z and Power Systems sales, or 28 per cent when taking currency effects into accont.

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