July 4, 2020
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IBM Reports Lowest Revenue This Century And Grotesque EPS Fudge; Pulls Guidance But Keeps Dividend

IBM Reports Lowest Revenue This Century And Grotesque EPS Fudge; Pulls Guidance But Keeps Dividend

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In the last quarter, there was some hope that IBM will finally change everything: in the end, after 5 quarters of a continuous decrease in revenue, the company has just been able to grow its revenue for the first time since the second quarter of 2018 and only for the 4th time in the last 8 years. Alas, this did not happen, and a few minutes ago IBM showed that revenue fell again in the first quarter, down 3.1% amid the spread of COVID-19, even though Red Hat sales increased its cloud business.

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On the other hand, “elevated” can use the term “freely”: total revenue is $ 17.6 billion, and there is also a lack of consensus forecast of $ 17.7 billion. IBM I quarter of 2020 was the worst sales quarter in this century.

A few more details:

  • Sales of cloud and cognitive software, including the recently acquired Red Hat, totaled $ 5.24 billion, up 5% from $ 5 billion a year earlier, but analysts missed a valuation of $ 5.3 billion.
  • Revenue from systems, including mainframes, was $ 1.37 billion, also not reaching a consensus of $ 1.42 billion.
  • Global technology services revenue, which is about 37% of IBM’s total revenue, continued to decline, and technology consulting sales amounted to $ 6.47 billion, down 5.9% from the same period last year, and completed a three-percent calculation of income (Exp. $ 6.51). billion)
  • Global revenue from business services was the only one, reaching $ 4.14 billion and exceeding the forecast of $ 3.91 billion.

Fun, even though revenue fell and declined and the world around it burned out, IBM still felt obligated to “outperform” sales-side EPSs of $ 1.80, reporting $ 1.84. US adjusted EPS (compared with $ 2.25 a year ago).

Still this number was total garbage for two reasons:

  • First, unadjusted earnings per share were $ 1.31, or 40% below the adjusted value. The GAAP bridge to non-GAAP was, as usual, absolutely ridiculous and continued the tendency of a “one-time, non-repetitive” rollback, which began so many years ago, when we cannot even remember, but one thing is certain: none of IBM’s multiple recurring payments are non-recurring or non-recurring payments.

  • Secondly, and as has become IBM’s habit in recent years, all net income of the company was received due to tax reliefbecause then how The net income for income tax was $ 49 million, and the company added a tax benefit of $ 1.2 billion to get a net profit after tax of $ 1.175 billion. This fabrication was so grotesque that IBM was even embarrassed by pointing out what an effective tax rate was and simply said, “It makes no sense,” when it clearly matters to anyone who foolishly thinks the company has beaten up profits.

Of course, all this does not matter, since the only thing that worries investors is the future of the company in the post-crown world, and here IBM had absolutely no clarity, since pulled up its profit forecast for the year, signaling that the Covid-19 pandemic was another obstacle to the company’s transition to cloud computing.

IBM is abolishing its leadership for the whole of 2020 in light of the current COVID-19 crisis. The company will review this position based on the clarity of the macroeconomic recovery at the end of the second quarter.

Bloomberg adds that new IBM CEO Arvind Krishna, who took control of Ginny Rometti earlier this month, has been forced to lead the 108-year-old tech giant through the economic turmoil caused by the coronavirus.

Many organizations put off large purchases of information technology to avoid costly, complex, and sometimes disruptive projects for existing business processes. IBM even before the advent of coronavirus struggled to constantly increase sales.

IBM is trying to increase its share of revenue from hybrid cloud software and services, including from competitors IBM Amazon and Microsoft, despite the fact that it has persistently continued to increase the practice of quantum computing in the hope of becoming the first company to have a comprehensive quantum computing platform. In 2018, IBM bought RedHat for a highly revalued amount of $ 34 billion (the price was more than 30 times higher than EBITDA) to speed up this work.

“IBM continues to focus on helping our customers adapt to the urgent challenges of the Covid-19 pandemic, while we continue to help them transfer their mission-critical workloads to the hybrid cloud and expand the use of AI to transform their operations,” Krsna is said in a statement.

And although IBM did not have the slightest idea of ​​what to expect in the future, it was confident enough that no matter what happened, it would give every penny to its shareholders, as it was in the first quarter, when IBM’s free cash flow totaled $ 1.4 billion. Here is also how much they returned to shareholders in the form of dividends.


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