IBM's Expectations Propel Its Shares, But Revenue Is Off -- WSJ
23 Enero 2019 - 1:03AM
Noticias Dow Jones
By Jay Greene
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 23, 2019).
International Business Machines Corp. said revenue fell 3.5% in
the fourth quarter, another setback in its yearslong quest to
recapture growth, but its signal that faster-growing businesses
would help boost profit this year sent shares higher.
IBM's stock jumped more than 6% after hours, driven in part by
the company's outlook for 2019. It expects adjusted per-share
earnings of $13.90, compared with $13.81 for the prior year. IBM
doesn't provide a forecast for revenue.
Chief Executive Ginni Rometty has struggled to turn around Big
Blue since taking over in 2012. Just a year ago, IBM triumphantly
returned to growth following nearly six years of shrinking
revenue.
Along the way, the company said a long-awaited turnaround was
coming as it built up faster-growing businesses. For several
quarters, it seemed it had gotten there. But IBM reported a
second-consecutive quarterly revenue drop in the final months of
2018.
IBM faced a tough comparison to year-ago results, when it
benefited from the recent introduction of a new mainframe system.
That business dropped 44% in the fourth quarter after growing 71% a
year ago, finance chief James Kavanaugh said in an interview. The
mainframe refresh had played a significant role in helping IBM to
return to revenue growth a year ago.
IBM's so-called strategic imperatives, a cluster of businesses
including cloud computing and data analytics, are Ms. Rometty's
antidote as she refashions the legacy technology vendor to compete
against Amazon.com Inc., Microsoft Corp. and Alphabet Inc.'s Google
in the cloud. Those businesses grew 5% to $11.5 billion, Mr.
Kavanaugh said.
Three years ago, IBM said it expected strategic imperatives,
which at the time accounted for only 25% of its revenue, to
generate $40 billion in revenue in 2018.
For the year, IBM posted $39.8 billion in revenue for the
businesses, up 9%. Mr. Kavanaugh added that those businesses are
"consistently 50% of our portfolio overall."
The 2019 outlook, meanwhile, was enough to sate investors
because their expectations are modest, said KeyBanc Capital Markets
analyst Arvind Ramnani. Given IBM's struggles in recent years,
however, it still has to show consistent progress in its
faster-growing markets, he said. "In order to say things have
turned, you need to see two to three quarters of execution," Mr.
Ramnani said, adding that he expects revenue to decline again
during the current quarter.
IBM moved to rev up its cloud-computing businesses in October,
announcing plans to buy Red Hat Inc. for about $33 billion.
IBM is counting on the deal, its largest ever, to increase its
business of selling so-called hybrid services in which companies
run programs that use computing resources from their own servers
and web services from IBM and others at the same time.
Mr. Kavanaugh said IBM still expects the Red Hat deal to close
in the second half of this year.
For the fourth quarter, revenue came in at $21.76 billion,
compared with $22.54 billion a year ago.
IBM swung to a profit of $1.95 billion from a $1.05 billion net
loss a year earlier, when it took a $5.5 billion charge related to
the U.S. Tax Cuts and Jobs Act of 2017.
Adjusted profit, which excludes some acquisition-related
expenses and other items, came to $4.87 a share.
Analysts surveyed by Refinitiv had expected revenue of $21.71
billion and adjusted profit of $4.82 a share.
Write to Jay Greene at Jay.Greene@wsj.com
(END) Dow Jones Newswires
January 23, 2019 01:48 ET (06:48 GMT)
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