IBM Quarterly Revenue Losing Streak Reaches 11 Straight, Earnings Slide But Beat Street

Viewed through the rosiest of glasses, IBM (IBM) is transitioning from a legacy hardware and software provider to a newly-invented supplier of cloud services, business analytics, mobile solutions and security platforms.

The trouble is the vendor’s quarterly performances keep saying otherwise–not that the transition isn’t in play but that it’s losing precious time growing roots. For Q4, some analysts such as Bernstein Research senior analyst Toni Sacconaghi expected IBM to report what he called a “messy quarter,” given the sell off its x86 server business to Lenovo, a $600 million restructuring charge, currency issues, stock buybacks and other concerns.

In that regard, the vendor’s Q4 report lived up to typecast.

IBM registered another miss for Q4 2014, posting a 12 percent shortfall in revenue compared to the same period last year to $24.1 billion, well short of analysts’ estimates of $24.8 billion. Per share earnings for the quarter fell 4 percent from last year to $5.54 a share while net income from continuing operations came in at $5.5 billion, an 11 percent slide from the year earlier period.

For the full year, IBM’s net income slid 7 percent to $15.8 billion and sales fell 6 percent to $92.8 billion. But in data that IBM argues reflects its transition, the vendor grew its cloud revenue by 60 percent to $7 billion, with cloud services accounting for $3 billion, a 75 percent uptick; business analytics showing a 7 percent climb to about $17 billion, mobile revenue tripling and security sales jumping up some 19 percent.

Overall, revenue associated with those four so-called strategic imperatives rose 16 percent to total $25 billion or 27 percent of the vendor’s annual sales, prompting Rometty to claim IBM is “making significant progress in our transformation, continuing to shift IBM’s business to higher value, and investing and positioning ourselves for the longer term.”

Coming off 2014 full year EPS of $15.59, IBM set expectations for 2015 at operating EPS of $15.75 to $16.50.

On a more granular level, the Q4 picture from IBM’s business units wasn’t too pretty. Its Global Services sales fell 8 percent while Software revenue dipped 7 percent to $7.6 billion with the key middleware products sliding 6 percent to $5.4 billion.

As expected, IBM’s Systems and Technology business again saw the bottom drop out, this time tumbling 39 percent to $2.4 billion for the quarter, with Power Systems falling 13 percent, System Z sales off 26 percent and System Storage slipping 8 percent.

IBM’s Global Financing sales were flat for Q4 at $532 million.

Overall growth market revenue fell 16 percent and sales in target geographies Brazil, China, India and Russia were particularly bad, falling some 21 percent in the quarter.

IBM chief financial officer Martin Schroeter said on an earnings call the vendor will pursue more partnerships in 2015 similar to last year’s enterprise mobility deal with Apple (AAPL) and a business analytics agreement with Twitter (TWTR).