IBM has published a fourth consecutive quarter of declining revenues and did not give profit forecasts for the year 2021. The process of transformation of IBM in the direction of the sphere of hybrid cloud and artificial intelligence technologies have not yet demonstrated a positive effect for the company.
IBM shares (IBM) dropped by 7.45% in after-hours trading on Thursday against the publication of a financial report for the 4th quarter and the entire year 2020.
IBM has reported a decline in revenues in each of its divisions and has not announced specific forecasts for 2021, saying only that it expects revenue growth in the current year.
The report for the 4th quarter 2020 IBM
Earnings per share fell by a record 56% to us $2.07, but it is higher than the average of analysts ‘ forecasts of $1,79.
Income fell sharply by 6% to $20,37 billion, continuing a long statistics of falling quarterly revenues of IBM. Market analysts were expecting more from the company, predicting revenues of $20,67 billion to See the quarterly history of revenue and profit IBM for the last 2 years can link.
Each of the five major segments of IBM showed a decline in comparison with last year values, the revenues from cloud and cognitive software decreased by 4.5% to $6.8 billion.
Explaining the reasons for the decline, chief financial officer, IBM Jim Cavanaugh said that the current macroeconomic trends related to the pandemic, has forced customers to go with a long-term enterprise license agreements for short-term.
At the same time, a subsidiary of Red Hat, whose activities were taken by IBM for the basis transformation, showed revenue growth of 19% to $1.3 billion software Company, open source Red Hat needs to help IBM become a strong player in the hybrid cloud market worth $1 trillion.
In November, the General Manager for IBM’s Arvind Krishna said in an interview with CNBC: “the Acquisition of Red Hat gave us the technological base on which to build a hybrid cloud technologies based on open source”.
Unfortunately, this approach did not show growth and the company switched to an accelerated transformation, deciding to separate the less profitable divisions. So, in October 2020, IBM announced the allocation of units Managed Infrastructure Services into a separate company NewCo.
According to James Cortada, decade worked for IBM and wrote a book about this company, the selection “actually takes over 50% of the business and makes it stand out as a separate company”. “Division into two parts will facilitate the prosperity of each company, based on its own characteristics.”
Market experts said that such a move will help resolve a long-standing rivalry between the new, fast-growing part of IBM, and old.
According to analyst Bloomberg Intelligence Anurag Rana, a great legacy IBM in the area of IT products has become an impediment for growth.
“Unloading of enterprises with a low growth rate can uncover the true value of Red Hat, which, according to our estimates, is more than $50 billion,” the analyst said.
The end of 2020 for IBM
IBM total revenues for the year 2020 was $73,62 billion, a decline of approximately 5% compared to revenues of $77,14 billion.
“In 2020, we have increased investment in our business by spending on research and capital investments, and in October announced the acquisition of seven companies, specializing in hybrid cloud and artificial intelligence.
Due to a stable cash generation, the steady increase in gross margins, disciplined financial management and adequate liquidity we occupy a good position for success as a leading company engaged in hybrid cloud platforms,” said Jim Cavanaugh, chief financial officer of IBM.
According to analysts, IBM’s revenue in 2021 will be $73.9 billion