Cloud, services fuel IBM's profit beat, robust outlook; shares jump
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Jan 22 (Reuters) - IBM Corp beat analysts'
fourth-quarter earnings estimates and forecast full-year profit
above expectations on Tuesday, as the company benefits from its
focus on newer businesses such as cloud, software and services,
sending its shares up about 7 percent.
The company has been shifting toward the faster-growing
segments to lower dependence on its traditional hardware
products and reverse years of revenue declines.
"We had our strongest signings quarter to finish out the
year in a long period of time, where we signed roughly $16
billion worth of signings - that's up 21 percent," Chief
Financial Officer James Kavanaugh told Reuters.
"We had 16 deals greater than a $100 million which talks to
value of our hybrid cloud, multi-cloud value proposition," he
IBM has been structuring its cloud strategy around helping
companies stitch together their multiple cloud platforms,
according to analysts, aiming not to compete head-to-head with
"hyperscale" cloud providers such as Amazon Web Services
Microsoft Azure and Alphabet Inc's Google
The company recently signed multiple cloud services
contracts, including with British telecom operator Vodafone Plc
and French bank BNP Paribas
Cloud business, part of what IBM refers to as "strategic
imperatives", grew 12 percent to $19.2 billion in 2018.
Underscoring the push into cloud, IBM in October agreed to
buy Red Hat Inc for $34 billion and is also shedding
some of its businesses.
The company forecast adjusted operating earnings for 2019 to
be "at least" $13.90 per share, while analysts on average were
expecting $13.79, according to IBES data from Refinitiv.
However, IBM, guided 2019 free cash flow below analysts'
expectation. The company expects free cash flow of about $12
billion for the year, compared with expectations of $12.67
IBM said revenue slipped to $21.76 billion in the three
months ended Dec. 31, but came in above analysts' average
estimate of $21.71 billion.
Throughout the year, the strengthening of the dollar cost
over $2 billion of revenue in 2018, Kavanaugh said.
The Armonk, New York-based technology services giant makes
over 60 percent of its revenue from outside the United States.
The company's cognitive software business, which houses
artificial intelligence platform Watson, analytics and
cybersecurity services, reported sales of $5.46 billion,
compared with analysts' expectation of $5.25 billion.
IBM's revenue of $4.32 billion from its global businesses
services segment also beat estimates of $4.15 billion.
Excluding special items, the company earned $4.87 per share,
above expectations of $4.82.
(Reporting by Pushkala Aripaka in Bengaluru; Editing by Sriraj
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