IBM revenue falls again in 4th quarter

I nternational

Business Machines Corp reported its 19th straight quarter of declining revenue, but forecast full-year earnings above Wall Street estimates due to growth in newer areas such as cloud-based services and analytics.

However, investments to drive growth in the cloud business and the company’s shift to a subscription-based as-a-service model hit its operating gross margin by 1.8 percentage points to 51% in the fourth quarter.

CFRA Research analyst David Holt said the company’s results still raised questions as to when revenue would grow.

“The 800-pound gorilla in the room is the overall inflection point towards revenue growth. That’s the moving target,” he said.

IBM forecast adjusted earnings of at least $13.80 per share for fiscal 2017, beating the average analyst estimate of $13.74, according to Thomson Reuters I/B/E/S.

Chief executive Gini Rometty’s transition efforts have shown revenue growth across some areas in recent quarters, with newer businesses driving the efforts.

Rometty has also been supportive of President-elect Donald Trump’s tax reform proposal.

“The proposal will allow companies in the United States to reinvest in training and educational programmes for their employees,’’ she wrote in a letter to Trump in November.

“When you have an administration that is pro-export ... we can see a benefit from that, and if we get fundamental tax reform, that could, on balance, help us as well,” chief financial officer Martin Schroeter told Reuters on Thursday.

Revenue from “strategic imperatives”, which includes cloud and mobile computing, data analytics, social and security software, rose 11% to $9.5 billion in the fourth quarter, from a year earlier. It contributed 41% to IBM’s total revenue in 2016.

Cloud computing revenue across IBM’s segments rose 33%. The business includes services such as SoftLayer, which leases online storage space to companies, as well as the BlueMix cloud platform.

Excluding items, IBM earned $5.01 per share, beating analysts’ average estimate of $4.88 per share.

The company’s revenue fell 1.3% to $21.77 billion in the quarter ended Dec 31, but beat analysts’ expectations of $21.64 billion.

Net income rose to $4.50 billion, or $4.72 per share, from $4.46 billion, or $4.59 per share, helped partly by a lower tax rate.