IBM Jumps On Guidance Boost Despite Revenue Slide, Massive Addbacks, Bizarre Tax Rate

IBM is back to its revenue declining, non-GAAP-EPS-beating-through-low-tax-gimmick ways.

With Wall Street expecting IBM to report (non-GAAP) EPS of $4.82 in Q4, the company "beat" by the tiniest of margins, reporting non-GAAP, adjusted EPS of $4.87, a 5% drop from last year.

So far so good, but as usual, there was a gaping difference between GAAP and non-GAAP, and in this case, it was more than double, with the company reporting a paltry $2.15 in GAAP EPS, more than 50% below the Non-GAAP number. Unfortunately for IBM, unlike last quarter when non-GAAP pre-tax and net income both posted modest increases even as their GAAP equivalents dropped, this quarter, both non-GAAP and GAAP pre-tax net Income declined Y/Y by -1% while non-GAAP Net Income dropped by 8% (GAAP Net Income was not meaningful).

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How did IBM bridge the traditionally lower GAAP EPS number to the higher non-GAAP? Simple: here is the full breakdown.

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More importantly, the EPS only beat because the company reverted back to its tax gimmick ways, as IBM's effective GAAP tax rate was 56% yet its non-GAAP EPS once again managed to tumble to only 12%, which while laughable was double the 6% effective non-GAAP - and lowest ever - tax rate in Q4 2017. 

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Meanwhile, IBM reported Q4 revenue of $21.8 billion, which was just better than the $21.7 billion expected...

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... however, after three-quarters of top-line growth - which followed 22 consecutive quarters of declines - IBM's Q4 revenue once again dropped after a similar decline in Q3, sliding by 3.3% Y/Y in Q4, and reminding investors that for all its non-GAAP and tax fudges, IBM remains a melting ice cube.

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And yet despite this now traditionally accounting gimmickry and deteriorating top line, investors appeared to like the results for two simple reasons: the first, IBM's cloud revenue did not collapse:

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