IBM Ends 22-Quarter Streak of Falling Revenue

Posted January 18, 2018 7:12 p.m. EST

IBM reported revenue growth for the first time in 5 1/2 years on Thursday, ending a streak of 22 consecutive quarters of shrinking sales.

The gain was modest — revenue rose by 4 percent — and one quarter does not make a trend. The quarterly result will also not erase the doubts of industry analysts who are skeptical that a genuine turnaround is underway at IBM.

But the company’s fourth-quarter report is an encouraging sign that IBM’s financial performance is stabilizing, and perhaps the transformation effort led by Virginia M. Rometty, the chief executive, is gaining ground. The company’s long run of slipping revenue began shortly after Rometty took over in 2012.

The corporate technology giant is remaking itself and investing heavily in new businesses like cloud computing, data analytics and artificial intelligence. The litmus test of success will be when those new units grow large enough to more than offset the steady erosion of its traditional hardware and software products, delivering revenue growth consistently.

In a statement, Rometty noted the strong growth in the new businesses, which IBM collectively calls “strategic imperatives” and now represent 46 percent of the company’s revenue. “We are pleased with our overall revenue growth in the quarter,” she said.

In after-hours trading, IBM shares fell 3.5 percent. The company’s shares had risen nearly 10 percent this year, and some investors were apparently expecting stronger results.

Like other large international corporations, IBM has kept some of its global profits off its domestic books to avoid the previous 35 percent federal corporate tax rate. Under the new tax law, companies get a one-time repatriation of those profits at tax rates ranging from 8 to 15.5 percent.

To benefit from the program, IBM took a $5.5 billion charge against profits to pay those taxes. But it did not immediately say how many billions of dollars would be repatriated, or what the company plans to do with the money.

IBM reported revenue of $22.5 billion in the fourth quarter of 2017, surpassing the average estimate of analysts of $22.05 billion, as compiled by Thomson Reuters.

Revenue was helped by the weakness of the dollar, since most of IBM’s sales are outside the United States. Excluding the currency gain, the company’s sales rose 1 percent.

IBM reported net loss for the quarter of $1.05 billion, because of the $5.5 billion charge to take advantage of the tax repatriation program.

The company’s operating earnings per share were $5.18, an 8 percent increase and slightly above the consensus Wall Street estimate of $5.17 a share.

IBM got a lift in the quarter from strong sales of a new line of mainframe computers. Revenue from its systems division, which includes mainframes, rose 32 percent to $3.3 billion.

The company’s new businesses grew 11 percent to $36.5 billion over the full year, IBM said, and the cloud business alone grew by 24 percent.

But its big technology consulting and services business did not grow in the quarter, and declined slightly without the currency gains in the quarter.