Earlier last week, IBM (NYSE: IBM) announced its fourth quarter results that surpassed market expectations. Despite the economic uncertainty, IBM continues to build its prowess through acquisitions.
IBM’s Financials
Related Articles
The fourth quarter revenues were flat at $16.69 billion, ahead of the Street’s estimates of $16.4 billion. Adjusted earnings of $3.60 a share were in line with what the market estimated.
Revenues from IBM’s software segment Grew 3% to $7.29 billion, above the consensus of $7.12 billion. Consulting revenues grew 0.5% to $4.77 billion, marginally lower than the Street’s estimate of $4.8 billion. Revenues from the infrastructure segment grew 2% to $4.48 billion, exceeding the $4.18 billion estimate. The growth in the segment was attributed to IBM’s Z Systems line of mainframe computers that grew 16% after the model became generally available last May.
IBM’s annual revenue grew 6% to $60.5 billion. Hybrid cloud revenue grew 11% to $22.4 billion. Adjusted net income grew 25% to $9.8 billion.
IBM did not provide a guidance for the current year, but maintained that it expects to deliver mid-single-digit revenue growth on constant currency basis. It expects to generate $10.5 billion in free cash flow in the year.
IBM’s Octo Acquisition
IBM continued its inorganic growth in the year, and recently announced the acquisition of Octo, an IT modernization and Digital Transformation services provider that exclusively serves the U.S. federal government, including defense, health, and civilian agencies. Since the appointment of Arvind Krishna as the CEO of IBM in April 2020, IBM has been strengthening its market offering through acquisitions. Octo will be the 8th acquisition since the change in leadership.
Reston, Virginia-based Octo, was set up with the belief that digital transformation could be delivered at scale to modernize the federal government’s remit including public healthcare, national security, defense, and intelligence. The acquisition will complement IBM’s existing strengths in IT modernization and digital transformation. Octo’s flexible and modern approach to digital transformation will help grow IBM Consulting’s public and federal market organization. Octo helps the government agencies in rapid IT modernization and seamless citizen engagement. It brings to IBM deep federal experience, and certifications in the technologies most used across the federal government.
Terms of the acquisition were not disclosed. Prior to the acquisition, Octo was privately held. It did not disclose its financials or funding status.
IBM’s stock is currently trading at $135.09 with a market capitalization of $121.2 billion. It touched a 52-week high of $153.21 in December last year. The stock had fallen to a 52-week low of $115.55 in October last year.
Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.
Photo Credit: Mikita Yo on Unsplash
