IBM Pledges to Return to Growth in 2021 After Another Sales Drop
22 January 2021 - 9:19AM
Dow Jones News
By Maria Armental
International Business Machines Corp. expects to return to
revenue growth this year, even as corporate customers' focus on
preserving cash during the coronavirus pandemic drove a 4.6%
revenue decline in 2020.
IBM has reported lower sales every quarter in 2020, underscoring
the challenges ahead for Chief Executive Arvind Krishna, who took
over during the pandemic.
In the latest quarter, revenue fell to $20.37 billion from
$21.78 billion a year earlier.
Analysts surveyed by FactSet expected $1.81 a share in adjusted
profit and $20.68 billion in revenue.
Shares fell 6.6% in after hours trading. IBM's stock closed at
$131.65 on Thursday, up 1.2% for the day but down 5.4% over the
past 12 months.
IBM, which had suspended financial projections last year over
uncertainty about the pandemic's business impact, said Thursday it
expects revenue to grow this year and anticipates $11 billion to
$12 billion in adjusted free cash flow for the year.
"The actions we are taking to focus on hybrid cloud and AI will
take hold, giving us confidence we can achieve revenue growth in
2021," Mr. Krishna said in a statement.
Cloud revenue rose 10% in the fourth quarter and 19% for the
year.
An information technology pioneer, IBM has struggled to revamp
its business in the age of the cloud and has reported mostly
revenue declines in the past decade. As part of the latest push to
turn around business, IBM plans to separate a major part of its
information-technology services operations, a roughly $19 billion a
year business.
Martin Schroeter, who had left IBM last year after a nearly
30-year career, will be chief executive of the company that will be
created through the spinoff.
Mr. Krishna is focusing the company on revenue growth and
investing in artificial intelligence and the hybrid-cloud --
betting that customers will increasingly operate across multiple
clouds, public and private. Since Mr. Krishna took over as CEO, IBM
has disclosed 10 acquisitions, including the purchase of cloud
professional and managed services provider Taos Mountain.
Beyond expanding hybrid cloud offerings, the company said, IBM
is looking to restore growth to its global business services
segment. That segment has seen lower revenue but margin expansion,
and increasing revenue across the IBM tech stack.
The global business services segment, which includes consulting,
application management and global process services, logged a 2.7%
revenue decline in the quarter but gross profit margin improved
30%.
Fourth-quarter profit fell to $1.36 billion, or $1.51 a share,
from $3.67 billion, or $4.11 a share a year earlier. On an adjusted
basis, profit from continuing operations was $2.07 a share. The
results include a roughly $2 billion charge before taxes.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
January 21, 2021 17:04 ET (22:04 GMT)
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