IBM Pledges to Return to Growth in 2021 -- Update
January 21 2021 - 7:06PM
Dow Jones News
By Maria Armental
International Business Machines Corp. expects to return to
revenue growth this year after reporting a 4.6% decline in 2020 as
corporate customers' focused on preserving cash during the
coronavirus pandemic.
IBM posted lower sales every quarter in 2020, underscoring the
challenges ahead for Chief Executive Arvind Krishna, who took over
during the pandemic.
In the latest quarter, revenue fell 6.5% to $20.37 billion,
missing analysts' projections, according to FactSet.
Shares fell 6.8% in after-hours trading. IBM's stock closed at
$131.65 on Thursday, down 5.4% over the past year.
IBM, which had suspended financial projections last year over
uncertainty about the pandemic's business impact, said Thursday
that it expects revenue to grow this year and anticipates $11
billion to $12 billion in adjusted free cash flow for the year and
$12 billion to $13 billion in 2022.
"The actions we are taking to focus on hybrid cloud and
[artificial intelligence] will take hold, giving us confidence we
can achieve revenue growth in 2021," Mr. Krishna.
Mr. Krishna said IBM is encouraging more risk-taking to drive
growth -- and ensuring a higher tolerance for failure across the
business.
"This should allow us to more quickly respond to clients, seize
more opportunities and drive better business outcomes," Mr. Krishna
said. That cultural shift, along with other changes intended to
return the company to revenue growth, means the old Big Blue "will
look different at the end of the year," he said.
An information technology pioneer, IBM has struggled to revamp
its business in the age of the cloud and has reported mostly
revenue declines in the past decade. As part of the latest push to
turn around business, IBM plans to separate a major part of its
information-technology services operations, a roughly $19 billion a
year business. IBM said it is on track to complete the spinoff by
year's end.
Martin Schroeter, who had left IBM last year after a nearly
30-year career, will be chief executive of the company that will be
created through the spinoff.
Mr. Krishna is focusing the company on revenue growth and
investing in artificial intelligence and the hybrid-cloud --
betting that customers will increasingly operate across multiple
clouds, public and private. Since Mr. Krishna took over as CEO, IBM
has disclosed 10 acquisitions, including the purchase of Taos
Mountain, a provider of cloud professional and managed
services.
Cloud revenue rose 10% in the fourth quarter and 19% for the
year.
Beyond expanding hybrid cloud offerings, the company said, IBM
is looking to restore growth to its global business-services
segment. That segment has seen lower revenue but margin
expansion.
The global business services segment, which includes consulting,
application management and global process services, logged a 2.7%
revenue decline in the quarter but gross profit margin improved
30%.
Fourth-quarter profit fell to $1.36 billion, or $1.51 a share,
from $3.67 billion, or $4.11 a share a year earlier. On an adjusted
basis, such as excluding a roughly $2 billion charge, profit from
continuing operations was $2.07 a share. Analysts surveyed by
FactSet expected $1.81 a share in adjusted profit.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
January 21, 2021 18:51 ET (23:51 GMT)
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