Strong 4th-Quarter Results Show IBM's Plan Is Working
- Oops!Something went wrong.Please try again later.
International Business Machines Corp. (NYSE:IBM) notched its highest sales gain in 10-plus years in 2021s fourth quarter, and investors are taking notice.
The company reported on Monday that it notched revenue of $16.7 billion for its fourth quarter of 2021, up 6.5%, or 8.6% adjusted for currency, compared with the prior-year quarter's spinoff-adjusted results. It was the tech giants highest quarterly growth since 2011, and well ahead of the Wall Street consensus forecast of $16.1 billion.
By segment, Software revenue rose by 8%, up 10% at constant currency (including about 5 percentage points from incremental external sales to Kyndryl). Consulting revenue was up 13%, or 16% at constant currency. Infrastructure revenue was flat, with a 2% rise at constant currency.
"We increased revenue in the fourth quarter with hybrid cloud adoption driving growth in software and consulting," said Arvind Krishna, IBMa chairman and CEO. "Our fourth-quarter results give us confidence in our ability to deliver our objectives of sustained mid-single digit revenue growth and strong free cash flow in 2022."
The results suggest that CEO Arvind Krishnas strategy for returning the legacy tech giant to growth is beginning to pay off, opined Barrons. Over the last year, IBM has restructured its business to focus on its software and consulting units, after spinning off its managed IT services business, now known as Kyndryl (KD). IBM also recently agreed to sell its Watson Health unit to private equity shop Francisco Partners. While it is early in the turnaround, Wall Street is likely to be encouraged.
IBM and Francisco Partners, a leading global investment firm that specializes in partnering with technology businesses, announced on Friday that they have signed a definitive agreement under which Francisco Partners will acquire health care data and analytics assets from IBM that are currently part of the Watson Health business. The assets acquired by Francisco Partners include extensive and diverse data sets and products, including Health Insights, MarketScan, Clinical Development, Social Program Management, Micromedex and imaging software offerings, IBM disclosed in a release.
The transaction is expected to close in the second quarter of this year and is subject to customary regulatory clearances. Financial terms of the transaction were not disclosed.
The agreement with Francisco Partners is a clear next step as IBM becomes even more focused on our platform-based hybrid cloud and AI strategy, said Tom Rosamilia, Senior Vice President of IBM Software, in a statement. IBM remains committed to Watson, our broader AI business, and to the clients and partners we support in healthcare IT. Through this transaction, Francisco Partners acquires data and analytics assets that will benefit from the enhanced investment and expertise of a healthcare industry focused portfolio.
We have followed IBMs journey in healthcare data and analytics for a number of years and have a deep appreciation for its portfolio of innovative healthcare products, commented Ezra Perlman, Co-President at Francisco Partners. IBM built a market leading team and provides its customers with mission critical products and outstanding service.
Under the terms of the agreement, the release noted, the current management team will continue in similar roles in the new standalone company, serving existing clients in the life sciences, provider, imaging, payer and employer, government health and human services sectors.
This article first appeared on GuruFocus.
