Growing software businesses such as Internet-based computing and data
analytics helped IBM boost earnings per share for the 40th consecutive
quarter a full decade even as revenue was largely flat.
price increased more than 4 percent in after-hours trading following the
announcement, as the results seemed to ease investor worries about the
uncertain global economy dampening corporate and government spending on
technology. The results beat Wall Street's expectations, as is often the
case with IBM. The technology bellwether's guidance for 2013 was also
stronger than expected.
It has helped that the company has been
focusing on growing its software business, which has higher profit
margins, over hardware. In fact, software was the only business segment
that saw a revenue increase during the quarter.
IBM is seen as a
good gauge of technology demand because it sells to major companies and
governments around the world. That said, it's not completely immune from
economic fluctuations. Its revenue missed Wall Street's expectations in
the third quarter, something IBM attributed largely to the economic
turmoil in Europe and elsewhere.
IBM said Tuesday that it earned
$5.83 billion, or $5.13 per share, in the October-December period.
That's up 6 percent from $5.49 billion, or $4.62 per share, in the same
period a year earlier.
The results include special items related
to acquisitions and to IBM's pension plan. Excluding those items,
earnings were $5.39 per share in the latest quarter, above Wall Street's
estimates of $5.25 per share.
Revenue slid less than 1 percent to
$29.3 billion from $29.49 billion. It would have been flat were it not
for currency fluctuations, which translated to fewer dollars IBM made on
overseas sales. Analysts polled by FactSet had expected revenue of
Revenue from software was $7.9 billion, an
increase of 3 percent from the fourth quarter of 2011. Revenue from
hardware fell 1 percent to $5.8 billion and revenue from technology
services fell 2 percent to $10.3 billion. Revenue from other businesses
declined as well.
For the full year, IBM earned $16.6 billion, or
$14.37 per share, up 5 percent from $15.86 billion, or $13.06 per share,
in 2011. Adjusted earnings were $15.25 per share last year, above
analysts' estimates of $15.14.
Revenue declined 2 percent to
$104.5 billion from $106.9 billion. Analysts had expected slightly lower
revenue of $104.4 billion.
For 2013, IBM expects earnings of at
least $15.53 per share. It expects adjusted earnings of at least $16.70,
above the $16.65 that analysts were expecting.
The company said
it is "well on track" toward its long-term outlook for adjusted earnings
of at least $20 per share in 2015. By 2015, it also expects software to
account for more than half its total profit. In 2012, software
accounted for 45 percent of IBM's profit, up from 43.5 percent a year
Armonk, N.Y.-based IBM's stock rose $8.37, or 4.3
percent, to $204.45 in after-hours trading. The stock had closed up
$1.61 at $196.08 in the regular session.