IBM Income Q4 2020

Arvind Krishna, SVP and Director at IBM Research, speaks on stage during the 2016 Wired Business Conference on 16 June 2016 in New York.

Brian Ach | Getty Images

Shares of IBM were down 7% in extended trading on Wednesday after reporting the company’s fourth-quarter revenue, falling short of analyst expectations.

Here’s how IBM performed:

  • Earnings: $ 2.07 per share, adjusted, vs. $ 1.79 per share, as expected by analysts, according to Refinitiv.
  • Revenue: $ 20.37 billion, $ 20.67 billion expected by analysts, according to Refinitive.

According to a statement, revenue fell 6% on an annual basis, declining for the fourth consecutive quarter. Revenue had not fallen so fast in five years. The company has sought to do major work in cloud computing and artificial intelligence under new CEO Arvind Krishna, but the revenue decline also ranked his predecessor, Ginni Rometty.

IBM’s cloud and cognitive software segment includes Red Hat, which generated $ 6.84 billion in revenue, down 5% year-over-year. This is less than the FactSet consensus estimate of $ 7.18 billion.

The global technology services unit came in with revenue of $ 6.57 billion, down 6% and below the consensus of $ 6.92 billion FactSet.

Global Business Services, which includes consulting, contributed $ 4.17 billion, about 3% and more than the consensus of $ 4.08 billion.

System revenue was $ 2.50 billion from mainframe computer and other hardware sales, a decline of 18% and under the $ 2.26 billion consensus estimate. The company is being compared to a time when the system’s revenue grew with a new mainframe.

The company did not issue formal earnings guidance, but said it expects revenue growth in 2021, with $ 11 billion to $ 12 billion in free cash flow.

The company’s earnings per share fell by 66%, the steepest decline in three years, partly due to a $ 2.04 billion pre-tax charge for structural works in the quarter. The hit was less than expected; In October the company said it would be around $ 2.3 billion.

The charge relates to a plan announced in October by IBM to spin off its Managed Infrastructure Services division, which provides hosting for web sites and web-based software to a separate public company by the end of 2021. The spin-off amount was earlier a major shift for IBM in place of Krishna as CEO in April. That division currently sits in Global Technology Services.

In the quarter, IBM said it has agreed to buy cloud consulting services provider Nordcloud for an undisclosed amount.

IBM stock has gained about 5% since its 20-hour start, while the S&P 500 has risen about 3% in the same period.

The executive will discuss the results with analysts on the conference call starting at 5 pm Eastern time.

This is breaking news. Please check back for updates.

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