IBM Prepares For Another Quarter Of Negative Growth
Estimize | Jan 19, 2017 06:49AM ET
Information Technology - IT Services | Reports January 19, After Market Closes
Key Takeaways
- The Estimize consensus is calling for earnings per share of $4.93 on $21.71 billion in revenue, 4 cents higher than Wall Street on the bottom line and nearly $100 million on the top
- IBM’s continued focus on cloud computing, Big Data, analytics and mobile are expected to lead the company into the future
- Near term headwinds including a sluggish PC market, weaker IT spending, currency headwinds should takes its toll on earnings
IBM prepares to announce fourth quarter results Thursday after the market closes. For over 8 quarters the tech giant failed to deliver positive growth largely due to weak IT spending, waning PC sales and a slow transition to the cloud. A return to growth this quarter would involve a sharp uptick in cloud and cognitive computing along with robust software sales. Early indications point to another weak quarter as financial performance continues to trend downward.
Analysts at Estimize are calling for $4.93 on the bottom line, 1% higher than the same period last year. That estimate along with revenue has remained relatively flat since IBM’s most recent report 3 months ago. Revenue for the period is forecasted to decline by 2% to $21.72 billion, marking yet another quarter of negative growth. Considering comps consistently drop below zero it’s not surprising that shares historically decline by 3% through an earnings report.
Cloud computing was one of the lone bright spots in the second quarter report. Cloud as a service revenue for the quarter increased 66% to $7.5 billion while overall cloud revenue edged higher by 44%. Analytics, mobile and security sectors made equally impressive strides, rising 16% from a year earlier. Cloud computing remains one of the most competitive markets though, with Amazon and Microsoft leading the charge. If IBM can’t establish a solid footprint in the space then its days are numbered.
IBM can unfortunately count on further declines in IT spending particularly in on-premise and data center hardware. Meanwhile volatile exchange rate fluctuations and intensifying competition in the industry pose additional headwinds to IBM’s legacy business.
Get The News You Want
IBM continues to make strategic acquisitions to offset some it losses and expedite the transition to the cloud. Many of these moves led to incremental revenue gains and a more favorable product portfolio. A strong balance sheet consisting of robust cash flow provides IBM with the flexibility to pursue additional takeovers in a changing computing landscape.
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