Shares of International Business Machines (IBM) rose sharply Tuesday after the management issued stronger than expected earnings guidance for fiscal 2019. The tech giant’s fourth-quarter revenues and adjusted earnings came in about analysts’ forecast but declined from the year-ago period.
Adjusted operating earnings, excluding charges related to the Tax and Job-cuts Act, dropped 5% annually to $4.87 per share during the fourth quarter but surpassed estimates. On an unadjusted basis, the company reported a profit of $1.95 billion or $2.15 per share, compared to a loss of $1.05 billion or $1.14 per share in the same period of 2017.
At $21.8 billion, December-quarter revenues were down 3% from the year-ago quarter but came in above the Wall Street estimates. The top line contracted for the second quarter in a row. During the three-month period, a 5% growth in Strategic Imperatives and a 6% increase in the cloud business were more than offset by the muted performance of the other segments.
“In 2018 we returned to full-year revenue growth, reflecting growing demand for our services and leadership solutions in hybrid cloud, AI, analytics and security. Major clients worldwide, such as BNP Paribas, are turning to the IBM Cloud and our unmatched industry expertise to transform their businesses and drive innovation,” said CEO Ginni Rometty.
The strong performance by Strategic Imperatives and the cloud business was more than offset by the muted performance by the other segments
Looking ahead, the management expects full-year 2019 adjusted operating earnings to be $13.90 per share. It sees unadjusted earnings of $12.45 per share and cash flow of about $12 billion for the year.
IBM has been aggressively shifting its focus to new technology in response to the persistent downtrend in topline performance, primarily due to the faltering demand for PCs and mainframe products. Last month, the company’s closely-followed acquisition of Red Hat (RHT) moved closer to completion after the latter’s shareholders approved the deal. IBM will be adding Red Hat to its fold by the second half of the year, spending about $34 billion.
IBM’s stock gained about 6% in the after-hours on Tuesday following the earnings report, after closing the regular session lower. The stock dropped about 27% in the past twelve months.
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