Industry Summary Articles

IBM today announced first-quarter 2016 earnings results.

"We are pleased with the progress we have made helping our clients apply new cognitive solutions and hybrid cloud platforms," said Ginni Rometty, IBM chairman, president and chief executive officer.  "IBM has established itself as the industry leader in total cloud, analytics and cognitive, all of which helped drive our strategic imperatives revenue growth at a strong double-digit rate, substantially faster than the market." 

"In the first quarter, we invested $3.6 billion in acquisitions and capital expenditures, and returned $2.2 billion to shareholders through dividends and gross share repurchases,” said Martin Schroeter, IBM senior vice president and chief financial officer.  "We will continue to invest as we transform our operations, expanding our industry expertise and our cognitive and cloud capabilities."

First-quarter revenues from the company’s strategic imperatives --- cloud, analytics and engagement --- increased 14 percent year to year (up 17 percent adjusting for currency).  Total cloud revenues (public, private and hybrid) for the quarter increased 34 percent (up 36 percent adjusting for currency).  Cloud revenue over the trailing 12 months was $10.8 billion.  The annual exit run rate for cloud delivered as a service -- a subset of the total cloud revenue -- increased to $5.4 billion from $3.8 billion in the first quarter of 2015.  Revenues from analytics increased 7 percent (up 9 percent adjusting for currency).  Revenues from mobile increased 88 percent (up 93 percent adjusting for currency) and from security increased 18 percent (up 20 percent adjusting for currency).

IBM continues to expect full-year 2016 operating (non-GAAP) diluted earnings per share of at least $13.50.  The company expects GAAP diluted earnings per share of at least $12.35.  The 2016 operating (non-GAAP) earnings expectation excludes $1.15 per share of charges for amortization of purchased intangible assets, other acquisition-related charges and retirement-related charges.

IBM had previously expected a free cash flow realization of GAAP net income which implied a full-year free cash flow range of $11 billion to $12 billion.  The company now expects free cash flow to be at the high end of that range at the same base level of operating (non-GAAP) EPS.

The decrease in the company’s pre-tax income was primarily the result of increased expenses for workforce transformation, real estate actions, and actions in Latin America, which totaled nearly $1.5 billion.

IBM’s tax rate for the first quarter includes a $1.0 billion refund of previously paid non-U.S. taxes, plus interest, for a total benefit of $1.2 billion.  This is the result of a long-standing tax matter which was resolved in the company’s favor in February and was disclosed in the 2015 IBM Annual Report.  The impact of the tax refund on the company’s first-quarter net income was largely equivalent on an after-tax basis to the expenses for workforce transformation, real estate actions, and actions in Latin America.

The company generated free cash flow of $2.3 billion in the first quarter, excluding Global Financing receivables, up $1.2 billion year to year.  IBM returned $1.2 billion in dividends and $0.9 billion of gross share repurchases to shareholders.  At the end of March 2016, IBM had $4.7 billion remaining in the current share repurchase authorization.

IBM ended the first-quarter 2016 with $14.9 billion of cash on hand, an increase of $6.7 billion since year-end 2015.  Debt, including Global Financing debt of $26.8 billion, totaled $45.6 billion, compared with $39.9 billion at year-end 2015.  Core (non-global financing) debt totaled $18.8 billion, an increase of $6.1 billion since year-end 2015.  The balance sheet remains strong and is well positioned to support the business over the long term.

To view the original press release, please click here.

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