On the surface, IBM results were impressive, with Q4 (non-GAAP of course) EPS of $5.01 easily beating consensus of $4.89 (and even the highest Wall Street estimate of $4.97), on revenue of $21.77BN, above the $21.6BN expected (GAAP EPS was only $4.73 but algos don't care about real numbers). And, as always happens with the IBM kneejerk reaction, just these headlines were enough to send the stock surging in the after hours.

There, however was a problem because as always is the case in the post-kneejerk reaction, traders realized that IBM again used the oldest trick in the book, i.e., lowering its effective tax rate, which it did once again, and with the exception of one negative earnings quarter, Q4's effective tax was just 9.6%, or the lowest in company history.

Applying a more realistic tax rate to IBM's pretax income would have resulted in a substantial miss to expectations.

Not only that, but despite beating lowballed expectations, IBM's revenue posted yet another annual revenue decline, its 19th consecutive quarterly drop in a row.

Finally, not helping the bulls was that IBM's gross profit margin, both adjusted and actual, missed expectations, and on an adj. basis printed 51.0%, below the 52.8% expected, while actual margin declined from 51.7% to 50.0% in the current quarter.

Looking at cash flow, in Q4 IBM reported that it generated net cash from operating activities of $3.2 billion; or $5.6 billion excluding Global Financing receivables. IBM’s free cash flow was $4.7 billion. Of this, IBM returned $1.3 billion in dividends and $0.9 billion of gross share repurchases to shareholders. As a result, at the end of December 2016, IBM had $5.1 billion remaining in the current share repurchase authorization.

There was some good news in the company's expectations, as IBM said it expects operating (non-GAAP) diluted earnings per share of at least $13.80 and GAAP diluted earnings per share of at least $11.95. This compares to Wall Streeet conesnsus of $13.74, although it was not clear what effective tax rate IBM is plugging in to goal seek this particular beat.

After spiking higher initially in the after hours session, IBM stock has since retraced the entire move higher and was now lower on the session.