Core estimates of IBM profits, but revenue losses. He sees growth returning in 2021.

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IBM

posted mixed results for the fourth quarter, with profits above Street estimates, but revenue coming amid continued pressures from a weak global economy.

For the quarter, IBM (ticker: IBM) reported revenue of $ 20.4 billion, down 6% (or 8% adjusted for currency and divested businesses) and below the $ 20 Wall Street analyst consensus forecast, 6 billion. Non-GAAP earnings were $ 2.07 per share, well ahead of the Street consensus view of $ 1.79 per share. On a GAAP basis, the company earned $ 1.41 per share, reflecting more than $ 2 billion in restructuring costs.

The stock fell 7% on Thursday’s trading session.

The company said it expects 2021 full-year revenue to show positive growth compared to 2020. IBM projects an adjusted 2021 full-year cash flow of between $ 11 billion and $ 12 billion, compared with US $ 10.8 billion in 2020 and between $ 12 billion and $ 13 billion in 2022 IBM has not provided detailed year-round revenue or earnings guidance and, as a standard practice, does not provide quarterly guidance.

IBM also did not provide new details about the planned division of its $ 19 billion managed infrastructure services business, which is expected to be completed by the end of the year.

Chief Financial Officer Jim Kavanaugh said in an interview with Barron’s this revenue was slightly below normal seasonality due to continued economic uncertainty, but earnings per share were above normal seasonality, as the company cut costs and reduced debt.

Kavanaugh notes that the company reduced its debt position to $ 61.4 billion at the end of the year, from a peak of $ 73 billion after the completion of the acquisition of Red Hat. He notes that IBM has $ 7 billion in debt with due in 2021 and is expected to reduce the total to $ 50 billion by the end of this year.

“We made progress in 2020, increasing our hybrid cloud platform as the basis for our customers’ digital transformations, while addressing the broader uncertainty of the macro environment,” said CEO Arvind Krishna in a statement. “The actions we are taking to focus on hybrid cloud and AI will be implemented, giving us confidence that we can achieve revenue growth in 2021.”

IBM said it had total cloud revenue in the December quarter of $ 7.5 billion, an increase of 10%, while Red Hat’s revenue grew 19%. The gross GAAP margin was 51.7%, while the non-GAAP gross margin was 52.5%, both 70 basis points above the previous year. (One basis point at 1/100 of a percentage point.) IBM paid $ 3.9 billion in debt last quarter. The company is not currently repurchasing its own shares.

For the full year, total cloud revenue reached $ 25 billion, an increase of 20%. The cloud now represents 37% of IBM’s overall revenue. IBM says that only

Amazon.com

(AMZN) and

Microsoft

(MSFT) have higher reported cloud revenue than IBM.

IBM operates in five segments; here’s a breakdown of their performance in the quarter.

• Cloud and cognitive software revenue was $ 6.8 billion, down 4.5%. This includes a 9% growth in cloud and data platforms, led by Red Hat. The revenue from cognitive applications has been stable. Transaction processing platform revenue fell 24%; cloud revenue grew 39%.

• Global business services revenue was $ 4.2 billion, down 2.7%.

• Global technology services revenue was $ 6.6 billion, down 5.5%.

• Systems revenue, including operating system hardware and software, had revenue of $ 2.5 billion, down 17.8%, mainly reflecting the drop in hardware sales.

• Global financing revenue was $ 286 million, down 4.8%.

At the end of Thursday’s trading, IBM’s shares were up 1.3% to $ 131.80. O

S&P 500

rose fractionally.

Write to Eric J. Savitz at [email protected]