IBM returns to growth

The logo for IBM is seen at the SIBOS banking and financial conference in Toronto Ontario Canada

Earnings, excluding some items, were $5.18 a share in the period ended December 31, compared with the average analyst estimate of $5.17. Wall Street expects IBM's revenue to grow in the current quarter and the next quarter as well, according to Thomson Reuters I/B/E/S.

After 22 consecutive quarters of declining revenue, International Business Machines (NYSE: IBM) is on the cusp of returning to growth. Now that streak has finally ended - a positive sign as the company faces competition from faster-growing companies like Amazon, Google and Microsoft.

As a result, IBM paid $5.5 billion to repatriate its profits, resulting in a $1.05 billion loss in the quarter - although it's not clear how much of its profits will now be taxed domestically. The charge includes re-measurement of deferred tax assets and liabilities and a tax on profits overseas. Including that charge, the tax rate for the quarter was 124%, and it was 49% for all of 2017.

IBM's cloud business grew 30 percent in the quarter to $5.5 billion. Six analysts surveyed by Zacks expected $21.96 billion.

IBM observers continue focusing on the strategic initiatives of the company - cloud, analytics, security and mobile - to deliver its growth in revenue.

IBM's shares tumbled about 4 percent in extended trading on Thursday. The Cognitive Solutions business grew by 3% at $5.4 billion in revenue. The company returned $9.8 billion to shareholders through $5.5 billion in dividends and $4.3 billion share buybacks.

IBM broke its 22-quarter streak of declining revenues in the fourth quarter of fiscal year 2017, according to company financial results released January 18. Its adjusted profit of $5.18 per share beat estimates by a penny. Analysts are looking for first-quarter EPS of $2.28 and revenues of $18.42.

"Over the past several years we have invested aggressively in technology and our people to reposition IBM", said James Kavanaugh, senior vice president and CFO at IBM. The company will have an annual effective tax rate of 16 percent, plus or minus 2%, inclusive of the tax reform, Kavanaugh said. This acceleration was driven by two of its software businesses: transaction processing software, which is largely mainframe software; and operating systems software, which also has a high percentage of mainframe software.

IBM's results call after US markets closed on Thursday forecast an operating profit of at least $13.80 per share for 2018, compared with $13.80 in 2017 and market expectations of $13.92, according to Thomson Reuters I/B/E/S. IBM collectively refers to the new business operations as strategic imperatives.

Despite impressive stats, it's not the most important thing for IBM at the moment. But the company didn't announce any specific adjustments.

While analytics were a disappointment, other products constituting the "strategic imperatives" by which IBM is transforming the company delivered strong results. Its content is produced independently of USA TODAY.

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