IBM Sales Expected to Dip Despite Red Hat Purchase: What to Watch

Date : 01/21/2020 @ 10:59AM
Source : Dow Jones News
Stock : International Business Machines Corp (IBM)
Quote : 130.15  -2.96 (-2.22%) @ 10:33PM
After Hours
Last Trade
Last $ 131.20 ▲ 1.05 (0.81%)

IBM Sales Expected to Dip Despite Red Hat Purchase: What to Watch

International Business M... (NYSE:IBM)
Historical Stock Chart

2 Months : From Dec 2019 to Feb 2020

Click Here for more International Business M... Charts.
By Asa Fitch 

International Business Machines Corp. is expected to report fourth-quarter earnings after the market closes Tuesday. The technology giant may be heading for its sixth successive quarter of year-over-year revenue decline -- but has been trying to reverse that slide, in part, through the $33 billion purchase of open source software giant Red Hat Inc.

Here's what to look for in the results:

EARNINGS FORECAST: IBM is expected to report adjusted earnings per share of $4.69 for the quarter ended Dec. 31, down from $4.87 for the same period last year, according to analysts surveyed by FactSet. Adjusted net income should be around $4.19 billion, down from $4.42 billion in the year-prior quarter, the analysts expect.

REVENUE FORECAST: IBM is set to report $21.64 billion in sales, the analyst survey shows, down about half a percent from the year-prior.

WHAT TO WATCH:

RED HAT IMPACT: IBM's earnings growth largely hinges on the success of the addition of Red Hat, the Raleigh, N.C.-based company that sells support and training for open-source software. The deal closed in July, but the full impact of the acquisition hasn't yet shown up in IBM's results, partly because of deal-related financial adjustments. Investors will be looking for signs of whether the combination is working or not.

IT SPENDING: Corporate IT spending slowed last year after a U.S. tax cut drove investments the year prior. That could hit IBM's fourth-quarter results and weigh on the outlook for the current year. IBM may also be losing market share in its core business, Morgan Stanley said last week, as it downgraded the stock. "While acceleration in Red Hat remains a bright spot, weakening trends at core IBM make sustainable revenue growth less likely," the analysts said.

MAINFRAME SALES: The fourth quarter was the first full three-month period in which IBM's latest generation of mainframe computers were on sale. New mainframes -- large, powerful computers that companies use to process and store data -- have traditionally meant a reliable revenue boost for IBM, as customers rush to upgrade hardware. The last spell of revenue growth for the company, in 2017 and 2018, was attributable in part to strong sales of the previous generation of mainframes. Investors are hoping the old playbook yields the same result.

Write to Asa Fitch at asa.fitch@wsj.com

 

(END) Dow Jones Newswires

January 21, 2020 05:44 ET (10:44 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

Latest IBM Messages

{{bbMessage.M_Alias}} {{bbMessage.MSG_Date}} {{bbMessage.HowLongAgo}} {{bbMessage.MSG_ID}} {{bbMessage.MSG_Subject}}

Loading Messages....


No posts yet, be the first! No {{symbol}} Message Board. Create One! See More Posts on {{symbol}} Message Board See More Message Board Posts


Your Recent History
LSE
GKP
Gulf Keyst..
LSE
QPP
Quindell
FTSE
UKX
FTSE 100
LSE
IOF
Iofina
FX
GBPUSD
UK Sterlin..
Stocks you've viewed will appear in this box, letting you easily return to quotes you've seen previously.

Register now to create your own custom streaming stock watchlist.


NYSE, AMEX, and ASX quotes are delayed by at least 20 minutes.
All other quotes are delayed by at least 15 minutes unless otherwise stated.