IBM Counts On Red Hat Acquisition To Deliver Growth

IBM’s (NYSE: IBM ) recently reported its fourth-quarter earnings that surpassed market expectations and sent the stock climbing 7% higher in the after-hours session. This was also the first time since 2011 that the company reported growth in revenues for the full year. Its robust performance was driven by growth in the cloud segment – an area of focus for IBM’s turnaround strategy.

IBM’s Financials
Revenues for the fourth quarter fell 3.5% to $21.76 billion, ahead of the Street’s forecast of $21.73 billion. Adjusted earnings of $4.87 for the quarter were also better than the Street’s estimates of $4.82.

By segment, revenues from Cognitive Solutions that includes solutions software and transaction processing software were flat over the year at $5.5 billion. The market was looking for revenues of $5.3 billion from the segment. Global Business Services segment including consulting, application management and global process services grew 4% to $4.3 billion. Technology Services & Cloud Platforms segment including infrastructure services, technical support services, and integration software fell 3% to $8.9 billion. Systems revenues were down 21% to $2.6 billion and Global Financing revenues fell 11% to $402 million.

IBM has been counting on its strategic imperatives revenues that include the cloud, analytics, mobile, social, and security services. It recorded nearly $40 million in revenues generated from these businesses during the trailing 12 month period. These lines of business now account for nearly half of IBM’s revenues.

For the year, IBM saw revenues grow 1% over the year to $79.6 billion with strategic imperatives revenues growing 9% to $39.8 billion and cloud revenues growing 12% to $19.2 billion. IBM ended the year with a non-GAAP EPS of $13.81.

IBM expects to end the current year with an EPS of at least $13.90, which was also ahead of the market’s forecast earnings of $13.79 per share.

IBM’s Red Hat Acquisition

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