"Big Blue" Turns Black and Blue over Q4 Earnings

International Business Machines (NYSE:IBM) reported upbeat earnings for its fourth quarter, while sales missed views.

The company reported GAAP Earnings Per Share from continuing operations of $1.41; Operating (non-GAAP) EPS of $2.07. EPS includes the impact of a pre-tax charge of more than $2.0 billion for structural actions in the fourth quarter

Revenue of $20.4 billion, down 6% (down 8% adjusting for divested businesses and currency)

Total cloud revenue of $7.5 billion, up 10% (up 8% adjusting for divested businesses and currency). Red Hat revenue up 19% (up 17% adjusting for currency), normalized for historical comparability

GAAP gross profit margin of 51.7%, up 70 basis points; Operating (non-GAAP) gross profit margin of 52.5%, up 70 basis points. Debt reduced by $3.9 billion since end of third quarter.

In the fourth quarter, the company generated net cash from operating activities of $5.9 billion, or $6.8 billion excluding Global Financing receivables. IBM’s free cash flow was $6.1 billion. The company returned $1.5 billion to shareholders in dividends.

IBM ended the fourth quarter with $14.3 billion of cash on hand, which includes marketable securities, up $5.3 billion from year-end 2019.

Debt, including Global Financing debt of $21.2 billion, totaled $61.5 billion, down $3.9 billion since the end of the third quarter, and down $11.5 billion since closing the Red Hat acquisition.

"We made progress in 2020 growing our hybrid cloud platform as the foundation for our clients’ digital transformations while dealing with the broader uncertainty of the macro environment," said Arvind Krishna, IBM chairman and chief executive officer.

"The actions we are taking to focus on hybrid cloud and AI will take hold, giving us confidence we can achieve revenue growth in 2021.”

IBM shares tumbled $13.81, or 10.5%, to $117.85.