IBM surges 5% higher following upbeat performance results for the fourth quarter

IBM CEO Ginni Rometty

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It's worth noting that Red Hat, IBM's latest $34bn acquisition, falls under this category, as well.

According to IBM, the growth in revenue was particularly a massive achievement for the company as its revenue remained under pressure for the past five consecutive quarters. Operating (non-GAAP) diluted earnings per share excludes $2.78 per share of charges for: amortization of purchased intangible assets and other acquisition-related charges, including pre-closing charges, such as financing costs; retirement-related charges; and tax reform enactment impacts. The company said it expects adjusted earnings per share of at least US$13.35 for 2020, ahead of Wall Street's projections for US$13.29.

Global Technology Services, the pillar for Infrastructure and Cloud Services and Technology Support Services, contributed the next biggest share, with revenues of US$6.9 billion, although this is down 4.8% year-on-year. He said the company almost doubled the number of new cloud migration contracts across both units and has a backlog of more than an $8.5 billion in unrecognized services revenue.

IBM reported a rise of 21 per cent for the quarter for its cloud business to reach $6.8 billion.

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Global Business Services (includes Consulting, Application Management and Global Process Services) - revenues of $4.2 billion, down 0.6 percent (down 0.3 percent adjusting for currency), with growth in Consulting, up 4 percent. Storage systems showed growth, but revenue from technological services fell by 4.8% in the quarter. IBM's dividend yield as of Wednesday's close was 4.69%.

The company had changed its reporting structure past year - its two biggest segments now are cloud and cognitive software, and global technology services.

The company forecast an adjusted profit of at least US$13.35 per share for the year, compared with estimate of US$13.29.

So far, January 2020 is already proving to be better than the last three months of 2019, which saw share price stuck around the US$132 to US$136 region. I was a little more positive than the street primarily because of currency swings seen during the quarter, and a weaker dollar definitely factored into these results if you look at Q3 2019 versus Q4 2019. But for the full year, Systems sales tanked by five per cent. A large and increasing portion of this investment will be on open hybrid and multicloud environments that enable them to move information across different environments. IBM spent $34 billion in 2018 to acquire Red Hat to help kick this strategy into gear. The consensus 12-month price target on the stock is $146.89.

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During the call, IBM highlighted partnerships with companies like Box and Workday as how customers are combining Red Hat and IBM products.

Evercore ISI analyst Amit Daryanani, however, recently downgraded IBM's stock outlook to "in-line" from "outperform", and price target to US$145 per share from US$160 on the back of a bleak business outlook for the first half of 2020.

IBM stock has gained nearly 20% over the past year.

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