Market Hammers IBM on Muddled Earnings

By Douglas A. McIntyre Updated Jan 13, 10:38AM EST · Published Apr 18, 4:28PM EDT

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Market Hammers IBM on Muddled Earnings — © Thinkstock

UPDATE: IBM shares sold off 4.94% after hours.

International Business Machines Corp. (NYSE: IBM) posted modest earnings per share (EPS) of $2.09, which was in line with the Wall Street consensus. The figure was down from $2.35 in the same period a year ago. Revenue fell from $19.6 billion to $18.7 billion, which was slightly better than consensus. Traders were indifferent immediately after the figures were announced, as shares barely moved from their $152.53 close.

Management’s comments about results were murky, as usual, and the financials were difficult to untangle. Ginni Rometty, IBM chairman, president and chief executive officer, said:

We are pleased with the progress we have made helping our clients apply new cognitive solutions and hybrid cloud platforms. IBM has established itself as the industry leader in total cloud, analytics and cognitive, all of which helped drive our strategic imperatives revenue growth at a strong double-digit rate, substantially faster than the market.

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In comments about what IBM calls “Strategic Imperatives,” management reported:

First-quarter revenues from the company’s strategic imperatives — cloud, analytics and engagement — increased 14 percent year to year (up 17 percent adjusting for currency). Total cloud revenues (public, private and hybrid) for the quarter increased 34 percent (up 36 percent adjusting for currency). Cloud revenue over the trailing 12 months was $10.8 billion. The annual exit run rate for cloud delivered as a service — a subset of the total cloud revenue — increased to $5.4 billion from $3.8 billion in the first quarter of 2015. Revenues from analytics increased 7 percent (up 9 percent adjusting for currency). Revenues from mobile increased 88 percent (up 93 percent adjusting for currency) and from security increased 18 percent (up 20 percent adjusting for currency).

However, the division that includes cloud services appeared to falter:

Technology Services and Cloud Platforms (includes infrastructure services, technical support services, integration software) — revenues of $8.4 billion, down 1.5 percent, up 1.9 percent adjusting for currency. Growth of 41 percent (45 percent adjusting for currency) in strategic imperatives revenue within the segment was driven by hybrid cloud infrastructure engagements.

It will take until at least next quarter for investors to have any conviction about IBM’s direction.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.