IBM released their first-quarter earnings result.
According to Ginni Rometty, IBM Chairman, President, and Chief Executive Officer, "In the first quarter, both the IBM Cloud and our cognitive solutions again grew strongly, which fuelled robust performance in our strategic imperatives. In addition, we are developing and bringing to market emerging technologies such as blockchain and quantum, revolutionizing how enterprises will tackle complex business problems in the years ahead."
Martin Schroeter, IBM Senior Vice President and Chief Financial Officer said, "We continued to make investments in the first quarter to expand our cognitive and cloud platform and we increased our research and development spending. At the same time, we returned more than $2.6 billion to shareholders through dividends and gross share repurchases."
First-quarter cloud revenues rocketed 33 percent (up 35 percent adjusting for currency) to $3.5 billion. Cloud revenue over the last 12 months was $14.6 billion. The annual exit run rate for cloud as-a-service revenue increased to $8.6 billion from $5.4 billion in the first quarter of 2016. Revenues from analytics increased 6 percent (up 7 percent adjusting for currency). Revenues from mobile rocketed 20 percent (up 22 percent adjusting for currency) and revenues from security increased 9 percent (up 10 percent adjusting for currency).
Full-Year 2017 Expectations
The company continues to expect operating (non-GAAP) diluted earnings per share of at least $13.80 and GAAP diluted earnings per share of at least $11.95. Operating (non-GAAP) diluted earnings per share exclude $1.85 per share of charges for amortisation of purchased intangible assets, other acquisition-related charges and retirement-related charges. IBM continues to expect free cash flow to be relatively flat year to year.
Cash Flow and Balance Sheet
In the first quarter, the company produced net cash from operating activities of $4.0 billion, or $1.9 billion excluding Global Financing receivables. IBM’s free cash flow was $1.1 billion, down year to year consistent with the amount of the Japan tax refund received in the first quarter of 2016. IBM returned $1.3 billion in dividends and $1.3 billion of gross share repurchases to shareholders. At the end of March 2017, IBM had $3.8 billion remaining in the current share repurchase authorisation.
IBM accomplished the first quarter of 2017 with $10.7 billion of cash on hand. Debt, including Global Financing debt of $28.5 billion, totaled $42.8 billion. Core (non-Global Financing) debt summed $14.3 billion. The balance sheet remains strong and is well positioned to sustain the business over the long run.
Segment Results for First Quarter
Cognitive Solutions (includes Solutions Software and Transaction Processing Software) -- revenues of $4.1 billion, up 2.1 percent (up 2.8 percent adjusting for currency) were powered by development in analytics and security, which include Watson-related offerings.
Global Business Services (includes Consulting, Global Process Services and Application Management) -- revenues of $4.0 billion, decreased by 3.0 percent (down 1.9 percent adjusting for currency). Strategic imperatives grew double digits led by the cloud and mobile practices.
Technology Services & Cloud Platforms (includes Infrastructure Services, Technical Support Services and Integration Software) -- revenues of $8.2 billion, decreased by 2.5 percent (down 2.0 percent adjusting for currency) with compelling development in strategic imperatives driven by hybrid cloud services.
Systems (includes Systems Hardware and Operating Systems Software) -- revenues of $1.4 billion, down 16.8 percent (down 16.1 percent adjusting for currency).
Global Financing (includes financing and used equipment sales) -- revenues of $405 million, down 1.2 percent (down 2.1 percent adjusting for currency).
For the first quarter, IBM’s ongoing effective GAAP tax rate was around 12 percent. The ongoing effective operating (non-GAAP) tax rate was approximately 15 percent, which is within the estimated range of 15 percent plus or minus 3 points provided earlier this year. IBM’s reported tax rates include the effect from a discrete tax benefit disclosed earlier this year.