Sunday 25 January 2015

IBM annual report 2014

IBM, annual, report, 2014, front page

Grrrr... once again I have been waiting in the hope that a nicer report will drop out but by the look of things that is taking too long and in the meantime I get impatient. Based on the press release from last week I will now make the summary of the full year for IBM in 2014. The stock market was not so excited about the report and the share price dropped with around -3% on the day of release. Needless to say the share price is already back up again and then some...

For the full report then please click here and as always all material is taken from there. To see my previous report regarding their progress please click on IBM report Q3 2014. To find out more about IBM then please look on my last analysis of IBM 2014.

Generally one must say that the report is not great. Below is listed all the different business units and the revenue in the final quarter as well as the full year. In basically every segment the revenue has dropped not only quarter to quarter but also for the full year. Looking at the revenue for the full year we see that it dropped from 98.4 billion USD to 92.8 billion USD so -5.7%. The only good news is that the gross profit margin seems to have started to increase in the fourth quarter.

IBM, annual, 2014, financial statement

In the table below we see that the decrease in continuing operations were in line with the decrease in revenue and due to the discontinued operations, which means them removing yet another hardware producing unit, IBM ended up with a very poor annual result of only 12 billion in net income. Without the discontinued operations the EPS would have even increased in comparison to 2013 which was part of the target with the massive share buy-back program that IBM has been running for the last couple of years. Still 11.97 USD per share is a very good result in my opinion.

IBM, annual, net income, 2014

Conclusion: Now the conversion of IBM seems to be as good as finished and the amount of none service related business is at a minimum. To accomplish this faster they paid out a lot of money to get rid of the business as can be seen in the discontinued operations. This should in some segments push up the gross margin  even further. I am impressed with IBM and their capability to change from being a hardware producer to a service provider with more or less retained revenue over the years that this change has taken place! I will remain as a shareholder in IBM for as long as Berkshire Hathaway will (see previous report on Berkshire Hathaway: Warren Buffett Q3 2014).


Eighth Wonder Investing said...

Interesting turn around. But I am in doubt.

I think IBM has way more major problems to deal with then just responding to the market demands. This article on forbes is really interesting:

But good luck, I really hope it turns out well with IBM, classic company.

Best regards,

Eighth Wonder Investing.

Anonymous said...

Thanks for the link to an interesting read.

My thoughts are... When a company such as ibm is having a massive business change and still make 12 billion in earnings then i am not worried.

As long as a company, any company for that matter, makes a profit they still have time to find their way.

/Fredrik von Oberhausen