IBM returns to growth after 6 years, warns higher tax rate to hit profits

Total revenue increased 3.6 percent to $22.54 billion, beating analysts’ average estimate of $22.06 billion. (Reuters)
Updated 19 January 2018
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IBM returns to growth after 6 years, warns higher tax rate to hit profits

BENGALURU: International Business Machines Corp’s 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.
IBM’s shares, which have rallied 10 percent so far this year on hopes of a strong turnaround in the company’s fortunes, fell more than 3 percent in extended trading on Thursday.
The company forecast stable margins and revenue growth for 2018, buoyed by growth in its newer businesses such as cloud computing and security services.
However, IBM forecast an operating profit of at least $13.80 per share for 2018, compared with $13.80 in 2017 and market expectations of $13.92, according to Thomson Reuters.
“According to Street expectations, we’re already very low for earnings, ... but still, you would have liked to have seen, with the little better revenue trajectory and some positive comments, that would have played in to a nicer number,” Pivotal Research analyst Lou Miscioscia said.
IBM forecast a 2018 operating tax rate of 16 percent, plus or minus 2 percentage points, compared with a rate of 12 percent in 2017.
“Tax will be a headwind in 2018,” IBM veteran and new Chief Financial Officer James Kavanaugh said on a conference call.
Kavanaugh said IBM would continue to “maintain a high level of investment” in 2018 as it boosts its capabilities on its high-margin “strategic imperatives” such as cloud, mobile, cybersecurity and data analytics.
That focus, started by Chief Executive Ginni Rometty, has helped IBM counter its faltering legacy hardware and software businesses and slow its revenue declines in recent quarters.
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 Rometty became CEO.
Revenue from IBM’s cloud business jumped 30 percent in the latest quarter. Revenue from all “strategic imperatives” rose 17 percent.
Total revenue increased 3.6 percent to $22.54 billion, beating analysts’ average estimate of $22.06 billion.
IBM swung to a loss of $1.05 billion from a year-ago profit of $4.50 billion, due to a $5.5 billion tax reform-related charge. Its adjusted profit of $5.18 per share beat estimates by a penny.
The company’s adjusted gross margins of 49.5 percent fell short of market expectations of 50.8 percent.


Saudi minister Al-Falih says Aramco IPO likely in 2019

Updated 25 May 2018
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Saudi minister Al-Falih says Aramco IPO likely in 2019

  • Energy Minister Khalid Al-Falih: “We are ready, the company (Saudi Aramco) essentially has ticked all the boxes. We’re simply waiting for a market readiness for the IPO.”
  • Khalid Al-Falih: “Most likely it will be in 2019 but we will not know until the announcement has been made. All I could say is stay tuned.”

RIYADH: Saudi Arabia is most likely to hold the initial public offering (IPO) of oil giant Aramco in 2019, Energy Minister Khalid Al-Falih said on Friday, confirming a delay from the initial plan to list the company this year.

“The timing I think will depend on the readiness of the market, rather than the readiness of the company or the readiness of Saudi Arabia,” Khalid Al-Falih, who’s also the company’s chairman, said at the St. Petersburg International Economic Forum in Russia on Friday.

“We are ready, the company essentially has ticked all the boxes,” he said. “We’re simply waiting for a market readiness for the IPO.”

For almost two years, Saudi officials said the IPO was “on track, on time” for the second half of 2018. But for the first time in March they suggested it could be delayed until 2019.

“Most likely it will be in 2019 but we will not know until the announcement has been made,” Al-Falih said. “All I could say is stay tuned.”

The Aramco IPO would be a once-in-a-generation event for financial markets. Saudi officials said they hope to raise a record $100 billion by selling a 5 percent stake, valuing the company at more than $2 trillion and dwarfing the $25 billion raised by Chinese retailer Alibaba Group Holding Ltd. in 2014.