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IBM Ends 22-Quarter Streak of Falling Revenue

20 January 2018

IBM's fourth-quarter cloud revenues increased 30 percent to $5.5 billion, with a spectrum of clients in the public and private sectors including multinational banks and airlines.

The Blue Chip tech giant, which has suffered 22 straight quarters of revenue declines, is expected to end that streak to start off the new year. The extra few hundred million dollars of mainframe revenue will be the main driver of IBM's fourth-quarter growth, assuming the company doesn't fall short of expectations.

"We are pleased with our overall revenue growth in the quarter", said Ginni Rometty, IBM chairman, president and chief executive officer, on Thursday.

In after-hours trading, IBM shares fell 3.5 percent.

In a note from GBH Insights after IBM's earnings call, head of technology research analyst Daniel Ives said that IBM's quarterly sales increase means that the company is "showing signs of life".

Shares fell about 4.4% in late trading despite the company beating earnings expectations and increasing revenue for the first time in nearly six years, according to Seeking Alpha. This compares the year-ago quarter when the company earned $5.01 per share on $21.77 billion in revenue.

Helping the cause are IBM's strategic imperatives.

The report marked the second consecutive quarter of flat or growing year-over-year revenue for IBM, and the first time since 2011 IBM has seen two consecutive quarters of flat or positive revenue growth. Also, currency exchange rates have been working in its favor lately, accounting for 3 percentage points of revenue after years of being a headwind.

Cloud revenue makes up a significant chunk of that strategic imperatives revenue.

For 2018, IBM said it expects revenue growth and margin stabilization. But the extent to which Strategic Imperatives can can grow, say, 10% to 12% year over year, and account for more than 50% of revenue, the long and painful transition for IBM and its investors would have finally be over.

Schroeter stressed the company's revenue is driven by growing business in services and products under "Strategic Imperatives". IBM's 2018 EPS is on par with what it had reported for 2017.

IBM absolutely needs to post revenue growth for the fourth quarter. It's been more than five years since IBM has managed to produce growth. He sold his stake in 2015 after "a lot of disappointments" but recently added the company to his stable of 20 stocks.

IBM Ends 22-Quarter Streak of Falling Revenue