IBM surprises in 2015 results, but still in decline for 2016

IBM has announced its 4th quarter results for 2015, which showed a slightly better than expected performance, with earnings of $4.5 billion, or $4.59 a share.

The earnings for the 4th quarter were recorded against total revenue of $22.1 billion, which, although better than expected, is still down 9 per cent from a year ago.
Despite these slightly better than anticipated earnings, IBM is facing some significant business challenges, which makes the financial outlook for 2016 look weak.

IBM, has declining sales and revenue in all of its major profit centers. IBM's technology service revenue fell 7 per cent from a year ago and business services slid 10 per cent. Software revenue fell 11 per cent and hardware fell 1 per cent.

City analysts weren't expecting much from IBM's fourth quarter leading into the results. "We see a painful multi-year turnaround from here, which leads to a prolonged period of underperformance," said Kulbinder Garcha, Credit Suisse analyst. "We do believe that large parts of IBM's business (hardware, operating systems, Services) are being impacted by the Cloud, which represents more than 40 per cent of the business."

Significantly, despite IBMs declining sales in service, software and hardware - which are due to customers migrating to the cloud - IBMs own cloud initiatives are beginning to gain traction. However, that growth in cloud services and analytics isn’t yet strong enough to counter falling sales elsewhere in the business.

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