IBM Profit Tops Estimate; Revenue Falls Short

(RTTNews) - International Business Machines Corp. (IBM) said Tuesday after the markets closed that its fourth quarter profit rose 6% from last year, helped mainly by a lower effective tax rate even as revenue fell 5.5%.

The company's quarterly earnings per share, excluding items, also came in above analysts' expectations, but its quarterly revenue fell short of analysts' forecast.

At the same time, the company forecast full year 2014 earnings above analysts' current consensus estimate.

"We continued to drive strong results across much of our portfolio and again grew earnings per share in 2013. While we made solid progress in businesses that are powering our future, in view of the company's overall full year results, my senior team and I have recommended that we forgo our personal annual incentive payments for 2013," said Ginni Rometty, IBM chairman, president and chief executive officer.

IBM shares are currently losing 3.61% in after hours trading after closing the day's regular trading session at $188.43, down $1.66. The shares trade in a 52-week range of $172.57 to $215.90.

For the fourth quarter, Americas revenues fell 3% from last year to $12.2 billion and Asia-Pacific revenues slipped 16% to $5.9 billion, while Europe/Middle East/Africa revenues grew 1% to $9.2 billion. OEM revenues for the quarter dropped 33% from last year to $452 million.

Revenues from the company's growth markets fell 9% in the fourth quarter. Revenues in the so-called BRIC countries -- Brazil, Russia, India and China - dropped 14%.

The company's global technology services segment reported fourth quarter revenue of $9.9 billion, down 3.6% from a year earlier. Global business services segment's revenue grew 0.6% to $4.7 billion in the fourth quarter. IBM is the world's biggest computer services firm.

The estimated services backlog at the end of the fourth quarter was $143 billion, up 2% from the year-ago level.

IBM's software revenue for the fourth quarter rose 2.8% year-over-year to $8.1 billion.

Fourth quarter revenues from the company's Systems and Technology segment dropped 26% year-over-year to $4.3 billion, with revenues from System z mainframe server products down 37%. IBM is the world's biggest server maker.

Recent media reports said that China's Lenovo Group Ltd., the world's largest PC maker, has revived talks to buy IBM's low-end server business. IBM's x86 server business sells servers used to power corporate data centers. IBM and Lenovo failed to agree last year on a price for the assets, estimated to be worth $2.5 billion to $4.5 billion.

For the fourth quarter ended December 31, 2013, the Armonk, New York-based technology giant reported net income of $6.2 billion or $5.73 per share, compared to $5.8 billion or $5.13 per share for the year-ago quarter.

Excluding items, operating earnings for the fourth quarter were $6.6 billion or $6.13 per share, compared to $6.1 billion or $5.39 per share in the in the prior year quarter.

On average, 22 analysts polled by Thomson Reuters expected the company to earn $5.99 per share for the fourth quarter. Analysts' estimates typically exclude special items.

Gross margin for the quarter shrank to 51.7% from 51.8% a year ago on a reported basis, but improved to 52.6% from 52.3% last year on an adjusted basis.

Big Blue's total revenues for the fourth quarter fell 5.5% to $27.70 billion from $29.30 billion in the same quarter last year. Twenty analysts had a consensus revenue estimate of $28.25 billion for the fourth quarter.

IBM has been acquiring small companies to drive growth and expand product offerings. The company has plans to make $20 billion worth of acquisitions by 2015. During the fourth quarter, IBM completed its acquisition of Fiberlink Communications, a privately held mobile management and security company based in Blue Bell, Pennsylvania.

IBM said last week that it plans to invest over $1.2 billion to expand its global cloud footprint.

In a bid to return more cash to shareholders, IBM's board in late October authorized $15 billion in additional funds for use in the company's stock repurchase program.

For the full year 2014, the company forecast earnings of at least $17.00 per share and operating earnings of at least $18.00 per share. Analysts currently expect the company to earn $17.97 per share for the full year 2014.

The company said it is well on track toward its long-term roadmap for operating earnings of at least $20 per share in 2015.