IBM returns to growth but warns of hit from tax hike

International Business Machines' revenue rose for the first time in 23 quarters, beating analysts' estimates, but the company warned that a higher tax rate this year would eat into its profit.

The company forecast stable margins and revenue for this year, buoyed by growth in its newer businesses such as cloud computing and security services.

However, IBM forecast an operating profit of at least US$13.80 per share for 2018. It forecast a 2018 operating tax rate of 16 per cent, plus or minus 2 percentage points, compared with a rate of 12 per cent last year.

"Tax will be a headwind in 2018," IBM veteran and new chief financial officer James Kavanaugh said.

The company's revenue finally rose in the latest fourth quarter, the first year-over-year increase since the first quarter of 2012, just after Mrs Ginni Rometty became chief executive.

Revenue from IBM's cloud business jumped 30 per cent in the latest quarter. Revenue from all "strategic imperatives" rose 17 per cent. Total revenue increased 3.6 per cent to US$22.54 billion (S$29.7 billion), beating analysts' average estimate of US$22.06 billion.

IBM swung to a loss of US$1.05 billion from a year-ago profit of US$4.5 billion, due to a US$5.5 billion tax reform-related charge. Its adjusted profit of US$5.18 per share beat estimates by a penny.

The company's adjusted gross margins of 49.5 per cent fell short of market expectations of 50.8 per cent.

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 20, 2018, with the headline 'IBM returns to growth but warns of hit from tax hike'. Print Edition | Subscribe