Revenue of IBM fall muffles optimistic profit forecast

IBM report

International Business Machines Corp. (IBM) reported another quarterly decline of revenue for the 19th time in a row but forecast full-year earnings above Wall Street predictions due to grow tin its 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 percent in the fourth quarter.

Shares of IBM went down 2.5 percent at $162.70 following a brief rise due to extended trading.

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

According to Holt "The 800-pound gorilla in the room is the overall inflection point towards revenue growth. That's the moving target”.

For fiscal 2017, IBM forecast adjusted earnings of around $13.80 per share, exceeding the average estimate of analysts of $13.74.

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 always shown support of Donald Trump’s proposal for tax reform. The proposal would allow companies in the United States to reinvest in training and educational programs for their employees, Rometty wrote in a letter to Trump in November.

Chief Financial Officer Martin Schroeter has told international news agency Reuters on Thursday "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".

IBM’s revenue fell 1.3 percent to $21.77 billion n the quarter that ended in December 31 but still has exceeded the $21.64 billion prediction of analysts.

Net income went up $4.72 per share at $4.50 billion from $4.59 per share at $4.46 billion aided a bit by a lower tax rate.

Over the last 12 months, IBM’s shares went up 30.2 percent exceeding the 23.2 percent gain in the broader Dow Jones Industrial Average.


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