IBM Sales Expected to Dip Despite Red Hat Purchase: What to Watch
21 Enero 2020 - 4:59AM
Noticias Dow Jones
By Asa Fitch
International Business Machines Corp. is expected to report
fourth-quarter earnings after the market closes Tuesday. The
technology giant may be heading for its sixth successive quarter of
year-over-year revenue decline -- but has been trying to reverse
that slide, in part, through the $33 billion purchase of open
source software giant Red Hat Inc.
Here's what to look for in the results:
EARNINGS FORECAST: IBM is expected to report adjusted earnings
per share of $4.69 for the quarter ended Dec. 31, down from $4.87
for the same period last year, according to analysts surveyed by
FactSet. Adjusted net income should be around $4.19 billion, down
from $4.42 billion in the year-prior quarter, the analysts
expect.
REVENUE FORECAST: IBM is set to report $21.64 billion in sales,
the analyst survey shows, down about half a percent from the
year-prior.
WHAT TO WATCH:
RED HAT IMPACT: IBM's earnings growth largely hinges on the
success of the addition of Red Hat, the Raleigh, N.C.-based company
that sells support and training for open-source software. The deal
closed in July, but the full impact of the acquisition hasn't yet
shown up in IBM's results, partly because of deal-related financial
adjustments. Investors will be looking for signs of whether the
combination is working or not.
IT SPENDING: Corporate IT spending slowed last year after a U.S.
tax cut drove investments the year prior. That could hit IBM's
fourth-quarter results and weigh on the outlook for the current
year. IBM may also be losing market share in its core business,
Morgan Stanley said last week, as it downgraded the stock. "While
acceleration in Red Hat remains a bright spot, weakening trends at
core IBM make sustainable revenue growth less likely," the analysts
said.
MAINFRAME SALES: The fourth quarter was the first full
three-month period in which IBM's latest generation of mainframe
computers were on sale. New mainframes -- large, powerful computers
that companies use to process and store data -- have traditionally
meant a reliable revenue boost for IBM, as customers rush to
upgrade hardware. The last spell of revenue growth for the company,
in 2017 and 2018, was attributable in part to strong sales of the
previous generation of mainframes. Investors are hoping the old
playbook yields the same result.
Write to Asa Fitch at asa.fitch@wsj.com
(END) Dow Jones Newswires
January 21, 2020 05:44 ET (10:44 GMT)
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