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Photo Credit: Michael Koukoullis

International Business Machines (IBM) Information Technology - IT Services | Reports January 19, After Market Closes

IBM prepares to announce fourth quarter results tomorrow after the market closes. For over 8 quarters the tech giant failed to deliver positive growth largely due to weak IT spending, waning PC sales and a slow transition to the cloud. A return to growth this quarter would involve a sharp uptick in cloud and cognitive computing along with robust software sales. Early indications point to another weak quarter as financial performance continues to trend downward.

Analysts at Estimize are calling for $4.93 on the bottom line,1% higher than the same period last year. That estimate along with revenue has remained relatively flat since IBM’s most recent report 3 months ago. Revenue for the period is forecasted to decline by 2% to $21.72 billion, marking yet another quarter of negative growth. Considering comps consistently drop below zero it’s not surprising that shares historically decline by 3% through an earnings report. 

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Cloud computing was one of the lone bright spots in the second quarter report. Cloud as a service revenue for the quarter increased 66% to $7.5 billion while overall cloud revenue edged higher by 44%. Analytics, mobile and security sectors made equally impressive strides, rising 16% from a year earlier. Cloud computing remains one of the most competitive markets though, with Amazon and Microsoft leading the charge. If IBM can’t establish a solid footprint in the space then its days are numbered.

IBM can unfortunately count on further declines in IT spending particularly in on-premise and data center hardware. Meanwhile volatile exchange rate fluctuations and intensifying competition in the industry pose additional headwinds to IBM’s legacy business.

IBM continues to make strategic acquisitions to offset some it losses and expedite the transition to the cloud. Many of these moves led to incremental revenue gains and a more favorable product portfolio. A strong balance sheet consisting of  robust cash flow provides IBM with the flexibility to pursue additional takeovers in a changing computing landscape. 

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