IBM planning more job cuts; Q4 tax rate draws scrutiny

IBM, which has already carried out a string of job cuts in recent quarters, expects to record a fresh $1B workforce rebalancing charge in Q1.

The news follows a quarter in which a 5.5% Y/Y revenue drop led IBM's SG&A spend to rise to 21.6% of revenue from 20.2% a year earlier, and its R&D spend to rise to 5.7% of revenue from 5.4%.

In addition to its huge buybacks, much attention is being given to the role an 11% tax rate (down from 16% in Q3) played in boosting IBM's earnings. Fund manager Mike Bergen estimates EPS would've been $0.80 lower if Big Blue's tax rate was at the 23% level expected by analysts.

Software (+3% Y/Y) was a relative bright spot, thanks to healthy middleware (+15%) and database (+5%) sales. "Cloud revenue," a catch-all phrase covering a variety of hardware, software, and services sales, rose 69% Y/Y to $4.4B, boosted by the SoftLayer acquisition.

2013 free cash flow was $15B, less than net income of $18B. IBM ended Q4 with $11.1B in cash, and $12.2B in non-global financing debt. CEO Ginni Rometty insists IBM is on track to hit its 2015 EPS goal of "at least" $20.

IBM -2.9% AH.  More on IBM's Q4.

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Comments (3)
  • Momintn
    , contributor
    Comments (6083) | Send Message
    I calculate that IBM investors now own 4.5% more of IBM than they did before.
    21 Jan 2014, 08:04 PM Reply Like
  • alisaygin
    , contributor
    Comment (1) | Send Message
    It is an old company and execs make tons of mistakes. It is gonna pop soon, the vision is very uninspiring
    21 Jan 2014, 09:16 PM Reply Like
  • s.khan
    , contributor
    Comments (80) | Send Message
    Listening to earnings call, I was flabbergasted that Martin Schroeter never mentioned that 4th quarter revenue would be $28.4B in constant currency.
    He did say that revenue was down 3% in CC from Q4,2012. A 3% decrease
    on the revenue of $29.3Bin Q4,2012 would be $28.4B in Q4,2013. This would
    be on target of $28.3B estimated by the analysts.
    True, the tax rate decreased significantly and some of it ( how much?) was
    the result of favorable tax audit. Again, the earnings were affected by the currency change unfavorably particularly from Japanese operations.
    It was neither specified nor discussed at all except as a general statement.
    Bottom line is the revenue and profit fell quickly from Hardware but other segments haven't grown fast enough to offset decline in hardware sales.
    Three segments identified for future growth show promise. But it will take time
    to show full results perhaps in 2015.
    21 Jan 2014, 09:37 PM Reply Like
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