ON TUESDAY, IBM REPORTED ITS FOURTH-QUARTER RESULTS FOR THE FISCAL YEAR ENDED DECEMBER 31. IBM reported revenue of $21.8 billion, up nearly 0.1 percent from a year earlier, compared with Wall Street’s previous forecast of $21.6 billion, and net profit of $3.67 billion, up 88.1 percent from a year earlier.
IBM reported fourth-quarter revenue that beat analysts’ expectations, breaking a five-quarter decline and beginning to show benefits from the company’s efforts to enter the hybrid cloud market. The company’s shares jumped 4 percent in after-hours trading after the results.
The increase was driven by IBM’s acquisition of Red Hat in the third quarter of last year, driving an 8.7 per cent year-on-year increase in its cloud computing and cognitive software division. IBM’s cloud computing business posted a record $6.8 billion in revenue.
Ibm chief executive Ginni Rometty is pinning the company’s future on the hybrid cloud market. Hybrid clouds allow companies to store data on private clouds and on multiple public cloud servers. In 2018, IBM paid $34 billion to buy Red Hat to advance this strategy. The company plans to use Red Hat to provide enhanced security services and applications in the hybrid cloud.
Red Hat contributed $1 billion to IBM in the fourth quarter. But according to U.S. accounting standards, IBM was only allowed to confirm $573 million of that amount. Excluding some of the costs, IBM reported earnings per share of $4.71, beating analysts’ average estimate of $4.69. The company also said it expected adjusted earnings per share of at least $13.35 for 2020, up from Wall Street’s forecast of $13.29.
The global technical services business, which accounts for about 30% of IBM’s total revenue, continued to decline. Revenue from the technology consulting division was $6.9 billion, down 4.8 percent from a year earlier. The global business services sector was $4.2 billion, down 0.6 percent from a year earlier.
IBM was a global leader in technology, but has lagged behind its competitors for years after missing out on the cloud computing revolution. “The company has been struggling in a hot tech bull market,” said Ivan Feinseth, an analyst at Tigres Financial, a US investment bank. “All types of technology companies are growing except IBM. “
IBM has long struggled to achieve revenue growth, a drag on share prices. IBM shares closed up 0.62 percent at $139.17 on Tuesday. The company’s shares rose about 4 percent to $144.50 in after-hours trading after the results.