Big Blue bleeds more red in Q4, promises better days to come

The fourth quarter of IBM's fiscal 2014 was a disappointing cap on a year that saw Big Blue's revenues and income both decline significantly since 2013.

Total revenues for the quarter were $24.1bn, which was 12 per cent lower than the same period a year ago and missed analysts' expectations. Revenues for the full year didn't suffer as badly, dipping just 5.7 per cent to $92.8bn.

IBM's net income, on the other hand, was battered badly in both its quarterly and annual results. Net income for Q4 was $5.5bn, which was down 11.3 per cent, year on year. And annual net income was down 27.1 per cent, to $12bn.

Earnings did manage to beat Wall Street's expectations, however, at $5.81 per diluted share.

During a conference call with financial analysts, IBM CFO Martin Schroeter said that some of the company's setbacks could be attributed to various charges related to the sale of Big Blue's Intel-powered System x server business to Lenovo and its offloading of its Customer Care business process outsourcing unit to Synnex. The strengthening of the US dollar versus other global currencies also played a role.

But those costs and adjustments don't fully account for the sales declines that IBM experienced across the quarter and the fiscal year, where revenues were down or flat in every segment of the company's business.

Quarterly revenues for IBM's Global Technology Services and Global Business Services units were down 7.6 per cent and 8.4 per cent from the year-ago quarter, respectively, although the mix of revenue types remained consistent with the fourth quarter of 2013. GTS brought in $9.2bn in sales, while GBS brought in $4.3bn.

Revenues for the Software group were down 7 per cent for the quarter, year-on-year, to $7.6bn. Only the Rational division experienced a modest 4 per cent sales growth, while WebSphere sales were down 6 per cent, Information Management software was down 9 per cent, Tivoli was down 2 per cent, and Workforce Solutions was down a worrying 12 per cent.

Likewise, quarterly revenues were down for every segment of IBM's Systems & Technology business versus Q4 of 2013. Total revenues for the group were $2.4bn, a gruesome 39 per cent decline.

Servers made up a smaller overall piece of the Systems & Tech pie, given the divestiture of the System x business, but the remaining pieces also just didn't sell as well as they did in 2013. Sales of System z mainframes were down 26 per cent from the year-ago period, Power server sales were down 13 per cent, and storage was down 8 per cent.

But such results are nothing new for IBM investors, who have watched the struggling firm report "disappointing" returns for several quarters now. The big news is expected to be Big Blue CEO Ginni Rometty's rumored mega re-org, which will reportedly split up the company into a number of new units with emphasis on such core IBM businesses as the cloud, data analytics, and its Jeopardy-beating Watson machine learning tech. It's expected that details of this restructuring could emerge as early as this week.

IBM's share price, meanwhile, remained mostly stable on Tuesday, dipping just slightly more than 2 per cent in after-hours trading. ®