Thread regarding IBM layoffs

Barrons - 1st Quarter Earnings

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When IBM reports first-quarter earnings on Tuesday, Wall Street will be focused on the growth rate of the tech giant’s software business—and any hints on the early progress on the company’s latest generation of mainframe computers.

Wall Street projects IBM (ticker: IBM) will post revenue of $13.8 billion, with profits of $1.40 a share for the March quarter. In the year-ago period, IBM reported revenue of $17.7 billion, but that was before the company completed the spin off of Kyndryl (KD), IBM’s former IT services management business. On an adjusted basis, revenue should be up about 5% from a year earlier.

In an analyst meeting last fall, IBM said that going forward it expects high-single-digit percentage growth from consulting; mid-single-digit growth from software, including high-teens growth from its Red Hat open-source software unit; and flattish growth from infrastructure, which includes mainframes.

Last quarter, IBM provided investors with two years of historic segment data restated for the Kyndryl spin. Based on those comparisons, the Street is expecting software revenue in the first quarter of $5.63 billion, up 5.8%; consulting revenue of $4.6 billion, up 8.7%; and infrastructure revenue of $3.1 billion, down from $3.3 billion a year earlier. The infrastructure decline is no surprise—as was widely expected, IBM launched its new Z16 mainframe in early April.

In the December quarter, revenue of $16.7 billion marked a 6.5% increase, or 8.6% in constant currency, compared with last year’s spin-adjusted results—the company’s best growth quarter since 2011.

BMO Capital analyst Keith Bachman, who has a Market Perform rating and $148 target price on IBM shares, is “intrigued with IBM’s valuation,” but isn’t convinced the company can hit its growth target for the software business without some additional acquisitions, he writes. “While we believe that Red Hat can maintain mid-teens type of growth, we have less confidence in the balance of the portfolio,” he writes in a research note previewing the quarter.

As Barron’s outlined late last year, IBM CEO Arvind Krishna has been re-engineering IBM, focusing on a return to sustainable growth after a long period of stagnancy. In particular, the company has been focused on sharpening its focus and boosting margins. IBM is now focused on two primary areas: artificial intelligence and hybrid clouds, which act as an intermediary among the crowded landscape of public clouds, private clouds, and on-premise data centers.

IBM shares are down 5.3% year to date as of Thursday’s close.

  • Paywalled: https://www.barrons.com/articles/ibm-stock-price-earnings-preview-51650042491
  • Paywall Removed: https://archive.ph/J67JI
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Comment! It's anonymous!

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Here's the link for the article that is quoted in the first comment to this OP, post-ID: @ojn+1gkS0YGx --

IBM first-quarter results beat estimates --
https://www.cnbc.com/2022/04/19/ibm-earnings-q1-2022.html

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Barron's is a rag. I trust information distributed by them about as much as that distributed by IBM Management.

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  1. 85 billion as expected by analysts, according to Refinitiv.

Revenue in the period rose 7.7% from a year earlier, IBM said in a statement. This is the company’s first full quarter without the managed infrastructure services business it spun off into an entity called Kyndryl. Sales to Kyndryl added 5 percentage points to revenue growth in the quarter.

Net income from continuing operations jumped 64% from a year earlier to $662 million. Overall net income declined 23%.

IBM raised its full-year guidance, calling for revenue growth in constant currency in the high end of its mid-single-digit range, with an additional 3.5 percentage points of growth from Kyndryl. In January the executives told analysts to expect mid-single-digit growth, not including impact from Kyndryl or currency.

In the first quarter, IBM’s software segment generated $5.77 billion in revenue, which was up 12% and above the $5.63 billion consensus among analysts surveyed by StreetAccount.

Consulting revenue rose 13% to $4.83 billion, higher than the $4.6 billion StreetAccount consensus.

Revenue from infrastructure fell 2% to $3.22 billion, as clients prepare for IBM’s next-generation mainframe computer later this year.

Also during the quarter, IBM said Francisco Partners agreed to buy its Watson health-care data and analytics assets in a deal reportedly worth over $1 billion. IBM issued updated historical figures for its high-margin software segment to better reflect its financials without those businesses.

In early March, IBM said it stopped doing business in Russia after the country invaded Ukraine.

“Russia is a very de minimis part of IBM,” Jim Kavanaugh, the company’s finance chief, said in an interview on Tuesday. The country accounts for 0.5% of total revenue and 2% of profit, he said. Management hasn’t witnessed any effects on business in Western Europe as a result of the departure, he said.

IBM also announced the acquisitions of environment data analytics software maker Envizi and telecommunications consulting firm Sentaca.

IBM’s stock has been outperforming the S&P 500 this year, falling about 3% as of Monday’s close, while the broader index is down 6%. Investors have rotated into value stocks in 2022, given rising interest rates and the war in Europe.

“The inflationary impacts and the escalating cost of talent acquisition are real,” Kavanaugh during the interview. The gross margin of IBM’s consulting business contracted to 24.3% from 27% in the fourth quarter, and the companywide gross margin reached 51.7%, narrower than it had been in at least three year

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