IBM pledges return to growth in 2021 after another sales drop

Stock drops more than 6% after hours following disappointing earnings

International Business Machines Corp. expects to return to revenue growth this year, even as corporate customers' focus on preserving cash during the coronavirus pandemic drove a 4.6% revenue decline in 2020.

IBM has reported lower sales every quarter in 2020, underscoring the challenges ahead for Chief Executive Arvind Krishna, who took over during the pandemic.

In the latest quarter, revenue fell to $20.37 billion from $21.78 billion a year earlier.

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Analysts surveyed by FactSet expected $1.81 a share in adjusted profit and $20.68 billion in revenue.

Shares fell 6.6% in after-hours trading. IBM's stock closed at $131.65 on Thursday, up 1.2% for the day but down 5.4% over the past 12 months.

IBM, which had suspended financial projections last year over uncertainty about the pandemic's business impact, said Thursday it expects revenue to grow this year and anticipates $11 billion to $12 billion in adjusted free cash flow for the year.

TickerSecurityLastChangeChange %
IBMINTERNATIONAL BUSINESS MACHINES CORP.120.83+1.95+1.64%

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"The actions we are taking to focus on hybrid cloud and AI will take hold, giving us confidence we can achieve revenue growth in 2021," Mr. Krishna said in a statement.

Cloud revenue rose 10% in the fourth quarter and 19% for the year.

An information technology pioneer, IBM has struggled to revamp its business in the age of the cloud and has reported mostly revenue declines in the past decade. As part of the latest push to turn around business, IBM plans to separate a major part of its information-technology services operations, a roughly $19 billion a year business.

Martin Schroeter, who had left IBM last year after a nearly 30-year career, will be chief executive of the company that will be created through the spinoff.

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Mr. Krishna is focusing the company on revenue growth and investing in artificial intelligence and the hybrid-cloud -- betting that customers will increasingly operate across multiple clouds, public and private. Since Mr. Krishna took over as CEO, IBM has disclosed 10 acquisitions, including the purchase of cloud professional and managed services provider Taos Mountain.

Beyond expanding hybrid cloud offerings, the company said, IBM is looking to restore growth to its global business services segment. That segment has seen lower revenue but margin expansion, and increasing revenue across the IBM tech stack.

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The global business services segment, which includes consulting, application management and global process services, logged a 2.7% revenue decline in the quarter but gross profit margin improved 30%.

Fourth-quarter profit fell to $1.36 billion, or $1.51 a share, from $3.67 billion, or $4.11 a share a year earlier. On an adjusted basis, profit from continuing operations was $2.07 a share. The results include a roughly $2 billion charge before taxes.