IBM Revenue Declines Again -- Update
20 January 2017 - 9:11AM
Dow Jones News
By Ted Greenwald
International Business Machines Corp. notched its 19th
consecutive quarter of falling revenue, year on year, as it
struggles to offset declines in older businesses with sales in
younger ones that are growing at a rapid clip.
The Armonk, N.Y., computing giant said its fourth-quarter 2016
net profit edged up 0.9% as it posted $21.77 billion in revenue. It
reported diluted earnings per share of $4.72 a share, or $5.01
excluding certain items. Analysts had expected adjusted earnings
per share of $4.88 and revenue of $21.64 billion, according to a
survey by Thomson Reuters.
For the full year, the company earned $13.59 adjusted earnings,
in line with its forecast of at least $13.50, on $79.92 billion in
total revenue.
For the year ahead, the company said it expects to deliver
adjusted earnings per share of at least $13.80, above analysts'
expectations of $13.74.
The company's shares fell 2% to $163.70 in after-hours
trading.
Investors lifted IBM's share price 21% in 2016, more than double
the S&P 500's performance, in a sign of confidence that its
ship is turning toward renewed growth after a long wane. The
company's traditional businesses selling equipment and services for
on-premises corporate computing facilities have been shrinking as
customers turn to off-premises computing. It has labored in recent
years to shift from older operations that it calls "core" to new
revenue streams that it has dubbed "strategic imperatives," such as
analytics (including the Watson cloud-based artificial intelligence
service), cloud computing, security, and mobile.
Sales from strategic imperatives in 2016 made up 41% of total
revenue -- ahead of Chief Executive Ginni Rometty's prediction of
40% by 2018 and compared with 35% of revenue in 2015. The point at
which these businesses to contribute more than half of revenue will
represent a major milestone in the turnaround Ms. Rometty has
sought since taking her post in late 2012.
Even at that point, however, profitability might remain an
issue, as the pretax income margin on total segment revenue slipped
in 2016 despite pockets of robust revenue growth in high-margin
areas.
Write to Ted Greenwald at Ted.Greenwald@wsj.com
(END) Dow Jones Newswires
January 19, 2017 16:56 ET (21:56 GMT)
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