By Maria Armental
International Business Machines Corp. expects to return to revenue growth this year after reporting a 4.6% decline in 2020 as corporate customers' focused on preserving cash during the coronavirus pandemic.
IBM posted 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 6.5% to $20.37 billion, missing analysts' projections, according to FactSet.
Shares fell 6.8% in after-hours trading. IBM's stock closed at $131.65 on Thursday, down 5.4% over the past year.
IBM, which had suspended financial projections last year over uncertainty about the pandemic's business impact, said Thursday that it expects revenue to grow this year and anticipates $11 billion to $12 billion in adjusted free cash flow for the year and $12 billion to $13 billion in 2022.
"The actions we are taking to focus on hybrid cloud and [artificial intelligence] will take hold, giving us confidence we can achieve revenue growth in 2021," Mr. Krishna.
Mr. Krishna said IBM is encouraging more risk-taking to drive growth -- and ensuring a higher tolerance for failure across the business.
"This should allow us to more quickly respond to clients, seize more opportunities and drive better business outcomes," Mr. Krishna said. That cultural shift, along with other changes intended to return the company to revenue growth, means the old Big Blue "will look different at the end of the year," he said.
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. IBM said it is on track to complete the spinoff by year's end.
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.
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 Taos Mountain, a provider of cloud professional and managed services.
Cloud revenue rose 10% in the fourth quarter and 19% for the year.
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.
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, such as excluding a roughly $2 billion charge, profit from continuing operations was $2.07 a share. Analysts surveyed by FactSet expected $1.81 a share in adjusted profit.
Write to Maria Armental at firstname.lastname@example.org
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