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IBM Performs Better than Analyst’s Expectations

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Recently, IBM Corp beat Wall Street’s quarterly earnings estimates, and it has been forecasted that 2019 will show profits above expectations. This was announced on Tuesday, which indicates that the Chief Executive Officer of IBM Ginni Rometty’s efforts to turn the technology services company around has been showing results.

The shares of IBM went up by 7 percent in the extended trading after IBM posted their first annual revenue growth since the year 2011. Rometty has been CEO of IBM since 2012 and has steered the company towards quicker-growing segments which include cloud, software, and services and has stayed away from traditional hardware products, but this hasn’t been a cakewalk though. The newer areas of focus for IBM has sometimes underwhelmed investors as well.

The Chief Financial Officer of IBM, James Kavanaugh told Reuters- “IBM signed an approximate $16 billion (about Rs. 1,14,000 crores) worth of contracts in the quarter, and it has been the strongest by the measure in a really long time.”

In  October, IBM bought the software company Red Hat for $34 billion, and this has remained as the company’s biggest acquisition till date in their more than 100-year history.

As a confirmation to the concerns of the investor, on a post-earnings call with analysts, Kavanaugh said that the response of client to their Red Hat acquisition has been “overwhelmingly positive.”

IBM’s cloud strategy has been focusing on helping companies to glue together multiple cloud platforms instead of competing with “hyperscale” cloud service providers such as Amazon Web Services, Microsoft Azure, and Alphabet’s Google.

MoffettNathanson analyst Lisa Ellis said- IBM’s cloud business has grown by a 12 percent to $19.2 billion in 2018. It has been one of the areas in which IBM has been actively looked to build as a part of its “Strategic Imperatives,” and this includes analytics, cybersecurity, and artificial intelligence. The core cloud businesses have performed “quite well” in the quarter and have been consistent with an overall view which states that enterprises have increasingly moved to full-scale cloud migration. 

IBM said its gross profit margin, another closely monitored metric, expanded to 49.1 percent compared with 49 percent a year ago and it expects to build on that momentum in 2019. The company forecast adjusted operating earnings for 2019 to be “at least” $13.90 per share, while analysts on average were expecting $13.79, according to IBES data from Refinitiv.

IBM has projected that in 2019, free cash flow of about $12 billion would happen, and this was the same range that had been set for 2018, whereas Wall Street, on an average, has been expecting $12.67 billion. IBM told that the revenue slipped to $21.76 billion in the past three months which ended on Dec. 31, but analysts’ averaged that the estimate of $21.71 billion would be their revenue. The dollar cost has strengthened, which was $2 billion in 2018. Armonk, a New York-based IBM has been receiving more than 60 percent of its revenue from outside the United States. The company’s cognitive software business, which also includes artificial intelligence platform Watson, analytics and cybersecurity services, has reported a sales worth $5.46 billion, in comparison to analysts’ expectation of $5.25 billion.

IBM has gained a whopping revenue of $4.32 billion from its global businesses services segment which has gone to beat their estimated revenue of $4.15 billion. This doesn’t include special items, but the company earned $4.87 per share, whereas the expectations were $4.82.

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