IBM managed to increase sales for the first time in almost six years, but that growth wasn’t fueled as much by cloud computing and other new products as some analysts had hoped, causing shares to tumble, according to Bloomberg.
“The bulls were hoping for a beat on that segment and that’s why the stock is trading down,“ said Daniel Ives, chief strategy officer at GBH Insights. Revenue in the newer businesses “missed whisper expectations,“ which disappointed the most bullish scenarios, he said.
IBM reported fourth-quarter sales of $11.1 billion in “strategic imperatives“, those newer products and services in cloud, analytics, security and mobile. While that was up 17 percent from a year earlier, it was just in line with the average estimate and many were hoping for more, Ives said.
Sales in the fourth quarter increased 3.6 percent to $22.5 billion, compared with the average analyst estimate of $22.06 billion. IBM had forecast the growth in October. The company said it took a one-time charge of $5.5 billion as a result of the new U.S. tax law, which weighed on profit.
Much of the growth fueling IBM’s $22.5 billion of revenue in the fourth quarter is coming from its new mainframe servers. Customers from banks to health-care companies are buying the hardware and accompanying software for their own data centers to run large applications. That should help keep pumping up revenue over the next couple of quarters, analysts said. But IBM will have to show that strategic imperatives will help it keep growing even when the bump from hardware sales fades.
Profit, excluding some items, were $5.18 a share in the period ended Dec. 31, compared with the average analyst estimate of $5.17. IBM came one cent short of the average analyst expectation of $13.81 a share for the full year. Under generally accepted accounting principles, IBM reported a loss for the quarter. The shares fell as much as 4.8 percent to $161 in extended trading.
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