Enterprise tech giant IBM reported “disappointing” fourth quarter as revenue slumped 6% to $20.4bn.
The company reported earnings per share of $1.41, ahead of Wall Street expectations. For the three months ended 31 December, IBM reported a net income of $1.35bn, down on the $3.67bn in the same period in 2019.
In October 2020 IBM revealed plans to spin off its sluggish managed services business into a separate company, leaving the original IBM to focus on its more successful hybrid cloud business and artificial intelligence (AI) technologies.
The need to jettison its legacy business units was underscored in its Q3 results, which saw revenue decline year on year but its cloud computing division perform well.
There was a similar story in IBM’s Q4 results, with total cloud revenue up 10% on the year-ago period at $7.5bn.
IBM’s big bet on multicloud has been bolstered by recent acquisitions, including cloud consulting firm Taos, cloud integrator Nordcloud and Salesforce integrator 7Summits.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below formBy GlobalData
In total, IBM has announced the acquisition of seven companies in the hybrid cloud and AI space since October.
“We made progress in 2020 growing our hybrid cloud platform as the foundation for our clients’ digital transformations while dealing with the broader uncertainty of the macro environment,” said Arvind Krishna, IBM chairman and chief executive officer, in a statement.
“The actions we are taking to focus on hybrid cloud and AI will take hold, giving us confidence we can achieve revenue growth in 2021.”
For the full year, IBM reported revenue of $73.6bn, down 5% on 2019. Overall revenue from its cloud business units was up 19% at $25.1bn.
Cloud is now 37% of IBM’s overall revenue, which puts it hot on the tails of Amazon and Microsoft.
“This was a disappointing quarter for IBM in our view, namely the 8% sales decline,” said Logan Purk, research analyst at Edward Jones. “IBM noted the pandemic continues to negatively impact the business as larger deals continue to be pushed out and the transactional software business was weak. In the near-term, this supports the negative view that IBM will continue to struggle to show meaningful sales growth.
“However, despite weaker-than-expected results, we are optimistic longer term based on IBM’s pivot to focus more on cloud and software-based products, which should support higher growth rates and a higher earnings multiple. Further, IBM must execute its spin-off of the managed infrastructure business successfully and on time, and we look for more timely updates throughout the year.”
Read more: IBM acquires cloud computing firm Taos