Big Blue Continues to Underwhelm Investors

International Business Machines Corp. (NYSE: IBM) reported its fourth quarter earnings report after the markets closed on Tuesday. The company had $4.84 in earnings per share (EPS) on $22.06 billion in revenue compared to Thomson Reuters’ consensus estimates that called for $4.81 in EPS on $22.04 billion in revenue. The same period from the previous year had $5.81 in EPS on $24.11 billion in revenue.

Revenues from continuing operations for the fourth quarter of 2015 totaled $22.1 billion and were down 9% (down 2% adjusting for currency) from the fourth quarter of 2014.

On the books the company has cash, equivalents, and marketable securities of $8.19 billion, compared to $8.48 billion at the end of the same period from the previous year.

The company reported its business segments’ results in the fourth quarter as:

  • Global Technology Services revenues decreased 7.1% to $8.13 billion with a gross profit margin of 37.7%.
  • Global Business Services revenues decreased 9.9% to $4.30 billion with a gross profit margin of 28.2%.
  • Software revenues decreased 10.7% to $6.77 billion with a gross profit margin of 88.0%.
  • Systems Hardware revenues decreased 1.4% to $2.37 billion with a gross profit margin of 48.0%.
  • Global Financing revenues decreased 14.6% to $454 million with a gross profit margin of 39.9%.
  • Other revenues decreased 47.1% to $43 million.

Ginni Rometty, IBM chairman, President and CEO, commented on earnings:

We continue to make significant progress in our transformation to higher value. In 2015, our strategic imperatives of cloud, analytics, mobile, social and security grew 26 percent to $29 billion and now represent 35 percent of our total revenue. We strengthened our existing portfolio while investing aggressively in new opportunities like Watson Health, Watson Internet of Things and hybrid cloud. As we transform to a cognitive solutions and cloud platform company, we are well positioned to continue delivering greater value to our clients and returning capital to our shareholders.

Shares of Big Blue closed Tuesday down 1.5% at $128.11, with a consensus analyst price target of $147.35 and a 52-week trading range of $128.67 to $176.30. Following the release of the earnings report the stock was down 0.7% at $127.20 in the after-hours trading session on Tuesday.

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