IBM's fourth quarter revenue fell 6% from a year ago, but the company said it expects to return to growth in 2021.
The company's earnings report was a mixed bag. IBM reported non-GAAP earnings of $2.07 a share and $1.41 a share under generally accepted accounting practices. However, IBM's fourth quarter revenue was down 6% to $20.4 billion.
Analysts were modeling fourth quarter revenue of $20.67 billion with non-GAAP earnings of $1.79 a share.
IBM said that total cloud revenue was $7.5 billion, up 10%, and Red Hat sales were up 19%.
For the year, IBM reported earnings of $6.13 a share on revenue of $73.6 billion, down 5%. Arvind Krishna, CEO of IBM, said the company made progress in focusing the company hybrid cloud and artificial intelligence.
Krishna said on an earnings conference call:
In 2021 we believe you will see progress showing up in our results. With that said, we know it's not necessarily going to be a straight line. The operating environment remains difficult because of what clients are experiencing at the moment. We can see that in the quarter just past. Our revenue was slightly behind typical seasonality, but we finished strong in free cash flow, which is important as it's the fuel for investments. Our performance reflects the fact that our clients continue to deal with the effects of the pandemic and broader uncertainty of the macro environment.
IBM's grand plan
While IBM's fourth quarter results weren't going to satisfy folks looking for big growth figures, Big Blue does have a plan that may work out.
IBM has gone on a shopping spree of companies that manage cloud deployments that span across Amazon Web Services, Microsoft Azure, and Google Cloud.
The upshot here is that IBM is aiming to be the Switzerland of multicloud. With Red Hat and open source, IBM can run your hybrid cloud and with newly acquired assets it'll have a crew of consultants to be a cloud connector.
Recent moves by IBM include:
- The company acquired Taos, a cloud consulting and managed services provider. IBM's John Granger, chief operating officer of global business services, said Taos has a platform that allows customers to choose from multiple providers.
- IBM acquired Nordcloud, a Europe cloud integrator, that is triple certified in AWS, Microsoft Azure, and Google Cloud.
- Big Blue bought 7Summits, a Salesforce integrator.
It's clear there's a race on to be the control plane in multicloud deployments, IBM has some key assets to be a player.
We are confident that we have the right strategy for our clients and for IBM. Let me comment on some of the proof points we have seen over the last few months as we execute on our hybrid cloud platform and AI strategy. First, to drive leadership and focus as a hybrid cloud platform company, a key element of this strategy is to win the architectural battle in cloud. And with our cloud foundation in place, client consumption continues to grow. We now have 2,800 clients using our platform, a number which has grown 40% over the last year. We're also making good headway in our focus on industry clouds which are designed to tackle the specific needs of mission-critical and highly regulated industries.
As for AI, Krishna said the plan was to be a "trusted partner of clients for data and AI."
Clients are now at the point where they are moving from experimenting with AI to deploying it at scale. To seize this opportunity, our AI platform is focused on data, automation and security, and now includes more than 30,000 clients who have turned to IBM to unlock value from their data. We're helping clients across industries build intelligent workflows by infusing AI into their core business processes, such as hiring, supply chain and customer service. When it comes to data and AI, cost is paramount. IBM is unique in that we make a hard commitment not to monetize or use our clients' data.
He also said quantum computing can be an avenue for growth in the future.
IBM's business units see revenue declines
By unit, IBM's fourth quarter results showed declines across all units.
- In the cloud and cognitive software division, which includes Red Hat, cognitive applications and processing platforms, IBM delivered revenue of $6.8 billion, down 4.5%. IBM saw growth in security, IoT and Red Hat, but transaction processing platforms took a hit.
- Global business services saw revenue of $4.2 billion, down 2.7% in the fourth quarter.
- Global Technology Services revenue in the fourth quarter fell 5.5% from a year ago to $6.6 billion.
- Systems revenue fell 17.8% to $2.5 billion.
As for the outlook, IBM said it expects to increase revenue in 2021 and generate adjusted free cash flow of $11 billion to $12 billion for the year.