IBM Announces 2014 Fourth Quarter and Full-Year Results

January 21, 2015

ARMONK, N.Y., Jan. 21 — IBM today announced fourth-quarter 2014 diluted earnings from continuing operations of $5.54 per share, compared with diluted earnings of $5.76 per share in the fourth-quarter of 2013, a decrease of 4 percent.  Operating (non-GAAP) diluted earnings from continuing operations were $5.81 per share compared with operating diluted earnings of $6.16 per share in the fourth-quarter of 2013, a decrease of 6 percent.

Fourth-quarter net income from continuing operations was $5.5 billion compared with $6.2 billion in the fourth-quarter of 2013, a decrease of 11 percent.  Operating (non-GAAP) net income from continuing operations was $5.8 billion, as compared with $6.6 billion in the fourth-quarter of 2013, a decrease of 13 percent.

For the fourth-quarter of 2014, IBM reported consolidated net income of $5.5 billion or $5.51 of diluted earnings per share, including operating net losses in discontinued operations related to the microelectronics manufacturing business.

Total revenues from continuing operations for the fourth-quarter of 2014 of $24.1 billion were down 12 percent (down 2 percent, adjusting for the impact of the divested customer care outsourcing and System x businesses and for currency) from the fourth-quarter of 2013 and were down 1 percent for the full year 2014, adjusting for the impact of the divested businesses and for currency.

“We are making significant progress in our transformation, continuing to shift IBM’s business to higher value, and investing and positioning ourselves for the longer term,” said Ginni Rometty, IBM chairman, president and chief executive officer.

“In 2014, we repositioned our hardware portfolio for higher value, maintained a services backlog of $128 billion and achieved strong revenue growth across cloud, analytics, mobile, social and security.  Together these strategic imperatives grew 16 percent in 2014 and now represent $25 billion and 27 percent of our revenue.”

Fourth-Quarter GAAP – Operating (non-GAAP) Reconciliation

Fourth-quarter operating (non-GAAP) diluted earnings from continuing operations exclude $0.27 per share of charges; $0.19 per share for the amortization of purchased intangible assets and other acquisition-related charges; and $0.08 per share for retirement-related charges driven by changes to plan assets and liabilities primarily related to market performance.

Geographic Regions

The Americas’ fourth-quarter revenues were $11.1 billion, a decrease of 9 percent (down 4 percent, adjusting for divested businesses and currency) from the 2013 period.  Revenues from Europe/Middle East/Africa were down 13 percent to $8.0 billion (down 1 percent, adjusting for divested businesses and currency).  Asia-Pacific revenues decreased 17 percent (down 2 percent, adjusting for divested businesses and currency) to $4.9 billion.

Growth Markets and Major Markets

Revenues from the company’s growth markets were down 16 percent (down 2 percent, adjusting for divested businesses and currency).  Revenues in the BRIC countries — Brazil, Russia, India and China — were down 21 percent (down 8 percent, adjusting for divested businesses and currency). China revenues were down 1 percent, adjusting for divested businesses and currency.  Revenues from the company’s major markets were down 11 percent (down 2 percent, adjusting for divested businesses and currency).

Services

Global Services segment revenues decreased 8 percent (flat adjusting for the impact of the divested customer care outsourcing and System x businesses and for currency) to $13.5 billion.  Global Technology Services segment revenues decreased 8 percent (up 2 percent adjusting for the impact of the divested customer care outsourcing and System x businesses and for currency) to $9.2 billion.  Global Business Services segment revenues were down 8 percent (down 3 percent, adjusting for currency) to $4.3 billion.

Pre-tax income from Global Technology Services decreased 26 percent and pre-tax margin decreased to 15.6 percent.  Global Business Services pre-tax income decreased 22 percent and pre-tax margin decreased to 16.4 percent.  Pre-tax income and margin include the impact of the fourth-quarter workforce rebalancing charge.

The estimated services backlog at December 31, 2014 was $128 billion, flat year to year adjusting for the divested customer care outsourcing and System x businesses and currency.

Software

Revenues from the Software segment were $7.6 billion, down 7 percent (down 3 percent, adjusting for currency) compared with the fourth-quarter of 2013.   Software pre-tax income decreased 11 percent and pre-tax margin decreased to 44.7 percent.  Pre-tax income and margin include the impact of the fourth-quarter workforce rebalancing charge.

Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Workforce Solutions and Rational products, were $5.4 billion, down 6 percent (down 3 percent, adjusting for currency) versus the fourth-quarter of 2013.  Operating systems revenues of $557 million were down 19 percent (down 16 percent, adjusting for currency) compared with the prior-year quarter.

Financing

Global Financing segment revenues were flat (up 5 percent, adjusting for currency) in the fourth-quarter to $532 million.  Pre-tax income for the segment decreased 11 percent to $526 million.

Hardware

Revenues from continuing operations for the Systems and Technology segment totaled $2.4 billion for the quarter, down 39 percent (down 12 percent, adjusting for the impact of the divested System x business and currency) from the fourth-quarter of 2013.  Systems and Technology pre-tax income increased 12 percent and pre-tax margin increased to 15.5 percent.  Pre-tax income and margin include the impact of the fourth-quarter workforce rebalancing charge.

Revenues from Power Systems were down 13 percent (down 11 percent, adjusting for currency) compared with the 2013 period.  Revenues from System z mainframe server products decreased 26 percent (down 23 percent, adjusting for currency).  Revenues from System Storage decreased 8 percent (down 5 percent, adjusting for currency).

Gross Profit

The company’s total gross profit margin from continuing operations was 53.3 percent in the 2014 fourth-quarter period compared with 52.4 percent in the 2013 fourth-quarter period.  Total operating (non-GAAP) gross profit margin from continuing operations was 53.9 percent in the 2014 fourth-quarter compared with 53.3 percent in the 2013 fourth-quarter period.

Expense

Total reported expense and other income from continuing operations declined 20 percent to $5.8 billion compared with the prior year period.  The reported reduction was driven by the gain of $1.4 billion ($1.1 billion pre-tax income benefit, net of related transaction and performance-based costs) from the divestiture of the System x business and the elimination of the expense for the System x business from the company’s run rate.  Without these items, expense and other income would have been up approximately 2 percent.  S,G&A expense of $6.0 billion was up 1 percent from the prior-year period and includes the workforce rebalancing charge of approximately $580 million.  R,D&E expense of $1.3 billion decreased 9 percent compared with the year-ago period, reflecting the divestiture of the System x business and currency impact.  Intellectual property and custom development income decreased to $199 million compared with $201 million a year ago.  Other (income) and expense was income of $1.5 billion, including the gain from the divested System x business, compared with prior-year income of $116 million.  Interest expense increased to $117 million compared with $113 million in the prior-year period.

Total operating (non-GAAP) expense and other income from continuing operations decreased 20 percent to $5.6 billion compared with the prior-year period, including the gain from the divestiture of the System x business.  Operating (non-GAAP) S,G&A expense increased 1 percent to $5.8 billion compared with the prior-year period and includes the workforce rebalancing charge.  Operating (non-GAAP) R,D&E expense of $1.3 billion was down 7 percent compared with the year-ago period, reflecting the divestiture of the System x business and currency impact.

Pre-Tax Income 

Pre-tax income from continuing operations was flat year over year at $7.1 billion; pre-tax margin of 29.4 percent was up 3.5 points compared with the prior-year period. Operating (non-GAAP) pre-tax income from continuing operations decreased 2 percent to $7.4 billion and pre-tax margin was 30.7 percent, up 3.0 points, compared to the year-ago period.

IBM’s tax rate from continuing operations was 22.3 percent, up 9.8 points year over year; operating (non-GAAP) tax rate was 21.8 percent, up 9.6 points compared to the year-ago period.  The change in the fourth-quarter tax rate is driven by prior year discrete tax items, including benefits from tax audit settlements.

Net income margin from continuing operations increased 0.2 points to 22.9 percent.  Total operating (non-GAAP) net income margin from continuing operations decreased 0.3 points to 24.0 percent.

The weighted-average number of diluted common shares outstanding in the fourth-quarter 2014 was 995 million, a decrease of 8 percent compared with the same period of 2013.  As of December 31, 2014, there were 991 million basic common shares outstanding.

Debt, including Global Financing, totaled $40.8 billion, compared with $39.7 billion at year-end 2013, and down $4.9 billion from the third quarter of 2014.  From a management segment view, Global Financing debt totaled $29.1 billion versus $27.5 billion at year-end 2013, resulting in a debt-to-equity ratio of 7.2 to 1.  Core (non-global financing) debt totaled $11.7 billion, a decrease of $0.5 billion since year-end 2013, resulting in a debt-to-capitalization ratio of 59 percent, which includes impacts from retirement plan remeasurement that take into account changes in discount rates and recently released U.S. mortality tables, the announced Microelectronics business divestiture and foreign exchange translation.

IBM ended the fourth-quarter 2014 with $8.5 billion of cash on hand and generated free cash flow of $6.6 billion, excluding Global Financing receivables, down approximately $1.8 billion year over year.  In the fourth quarter of 2014, the company returned $1.2 billion to shareholders through $1.1 billion in dividends and $0.1 billion of gross share repurchases.

At the end of December 2014, IBM had approximately $6.3 billion remaining from the current share repurchase authorization.

Full-Year 2014 Results

Net income from continuing operations for the twelve months ended December 31, 2014 was $15.8 billion compared with $16.9 billion in the year-ago period, a decrease of 7 percent.  Diluted earnings per share from continuing operations were $15.59, up 2 percent compared to the 2013 period.

The consolidated diluted earnings per share were $11.90 as compared to $14.94 per share in 2013, down 20 percent. Revenues from continuing operations for the twelve-month period totaled $92.8 billion, a decrease of 6 percent (down 1 percent, adjusting for divested businesses and currency) compared with $98.4 billion for the twelve months of 2013.

Full year results include a non-recurring pre-tax charge of $4.7 billion, or $3.4 billion, net of tax.  The charge includes an impairment to reflect fair value less estimated costs to sell the Microelectronics manufacturing business assets, which the company has classified as held for sale at December 31, 2014.  The charge also includes other estimated costs related to the transaction, including cash consideration expected to be transferred to GLOBALFOUNDRIES of approximately $1.5 billion.

Operating (non-GAAP) net income from continuing operations for the twelve months ended December 31, 2014 was $16.7 billion compared with $18.4 billion in the year-ago period, a decrease of 9 percent.  Operating (non-GAAP) diluted earnings per share from continuing operations were $16.53 compared with $16.64 per diluted share for the 2013 period, a decrease of less than 1 percent.

Source: IBM

Subscribe to HPCwire's Weekly Update!

Be the most informed person in the room! Stay ahead of the tech trends with industry updates delivered to you every week!

Nvidia’s New Blackwell GPU Can Train AI Models with Trillions of Parameters

March 18, 2024

Nvidia's latest and fastest GPU, code-named Blackwell, is here and will underpin the company's AI plans this year. The chip offers performance improvements from its predecessors, including the red-hot H100 and A100 GPUs. Read more…

Nvidia Showcases Quantum Cloud, Expanding Quantum Portfolio at GTC24

March 18, 2024

Nvidia’s barrage of quantum news at GTC24 this week includes new products, signature collaborations, and a new Nvidia Quantum Cloud for quantum developers. While Nvidia may not spring to mind when thinking of the quant Read more…

2024 Winter Classic: Meet the HPE Mentors

March 18, 2024

The latest installment of the 2024 Winter Classic Studio Update Show features our interview with the HPE mentor team who introduced our student teams to the joys (and potential sorrows) of the HPL (LINPACK) and accompany Read more…

Houston We Have a Solution: Addressing the HPC and Tech Talent Gap

March 15, 2024

Generations of Houstonian teachers, counselors, and parents have either worked in the aerospace industry or know people who do - the prospect of entering the field was normalized for boys in 1969 when the Apollo 11 missi Read more…

Apple Buys DarwinAI Deepening its AI Push According to Report

March 14, 2024

Apple has purchased Canadian AI startup DarwinAI according to a Bloomberg report today. Apparently the deal was done early this year but still hasn’t been publicly announced according to the report. Apple is preparing Read more…

Survey of Rapid Training Methods for Neural Networks

March 14, 2024

Artificial neural networks are computing systems with interconnected layers that process and learn from data. During training, neural networks utilize optimization algorithms to iteratively refine their parameters until Read more…

Nvidia’s New Blackwell GPU Can Train AI Models with Trillions of Parameters

March 18, 2024

Nvidia's latest and fastest GPU, code-named Blackwell, is here and will underpin the company's AI plans this year. The chip offers performance improvements from Read more…

Nvidia Showcases Quantum Cloud, Expanding Quantum Portfolio at GTC24

March 18, 2024

Nvidia’s barrage of quantum news at GTC24 this week includes new products, signature collaborations, and a new Nvidia Quantum Cloud for quantum developers. Wh Read more…

Houston We Have a Solution: Addressing the HPC and Tech Talent Gap

March 15, 2024

Generations of Houstonian teachers, counselors, and parents have either worked in the aerospace industry or know people who do - the prospect of entering the fi Read more…

Survey of Rapid Training Methods for Neural Networks

March 14, 2024

Artificial neural networks are computing systems with interconnected layers that process and learn from data. During training, neural networks utilize optimizat Read more…

PASQAL Issues Roadmap to 10,000 Qubits in 2026 and Fault Tolerance in 2028

March 13, 2024

Paris-based PASQAL, a developer of neutral atom-based quantum computers, yesterday issued a roadmap for delivering systems with 10,000 physical qubits in 2026 a Read more…

India Is an AI Powerhouse Waiting to Happen, but Challenges Await

March 12, 2024

The Indian government is pushing full speed ahead to make the country an attractive technology base, especially in the hot fields of AI and semiconductors, but Read more…

Charles Tahan Exits National Quantum Coordination Office

March 12, 2024

(March 1, 2024) My first official day at the White House Office of Science and Technology Policy (OSTP) was June 15, 2020, during the depths of the COVID-19 loc Read more…

AI Bias In the Spotlight On International Women’s Day

March 11, 2024

What impact does AI bias have on women and girls? What can people do to increase female participation in the AI field? These are some of the questions the tech Read more…

Alibaba Shuts Down its Quantum Computing Effort

November 30, 2023

In case you missed it, China’s e-commerce giant Alibaba has shut down its quantum computing research effort. It’s not entirely clear what drove the change. Read more…

Nvidia H100: Are 550,000 GPUs Enough for This Year?

August 17, 2023

The GPU Squeeze continues to place a premium on Nvidia H100 GPUs. In a recent Financial Times article, Nvidia reports that it expects to ship 550,000 of its lat Read more…

Analyst Panel Says Take the Quantum Computing Plunge Now…

November 27, 2023

Should you start exploring quantum computing? Yes, said a panel of analysts convened at Tabor Communications HPC and AI on Wall Street conference earlier this y Read more…

DoD Takes a Long View of Quantum Computing

December 19, 2023

Given the large sums tied to expensive weapon systems – think $100-million-plus per F-35 fighter – it’s easy to forget the U.S. Department of Defense is a Read more…

Shutterstock 1285747942

AMD’s Horsepower-packed MI300X GPU Beats Nvidia’s Upcoming H200

December 7, 2023

AMD and Nvidia are locked in an AI performance battle – much like the gaming GPU performance clash the companies have waged for decades. AMD has claimed it Read more…

Synopsys Eats Ansys: Does HPC Get Indigestion?

February 8, 2024

Recently, it was announced that Synopsys is buying HPC tool developer Ansys. Started in Pittsburgh, Pa., in 1970 as Swanson Analysis Systems, Inc. (SASI) by John Swanson (and eventually renamed), Ansys serves the CAE (Computer Aided Engineering)/multiphysics engineering simulation market. Read more…

Intel’s Server and PC Chip Development Will Blur After 2025

January 15, 2024

Intel's dealing with much more than chip rivals breathing down its neck; it is simultaneously integrating a bevy of new technologies such as chiplets, artificia Read more…

Baidu Exits Quantum, Closely Following Alibaba’s Earlier Move

January 5, 2024

Reuters reported this week that Baidu, China’s giant e-commerce and services provider, is exiting the quantum computing development arena. Reuters reported � Read more…

Leading Solution Providers

Contributors

Choosing the Right GPU for LLM Inference and Training

December 11, 2023

Accelerating the training and inference processes of deep learning models is crucial for unleashing their true potential and NVIDIA GPUs have emerged as a game- Read more…

Training of 1-Trillion Parameter Scientific AI Begins

November 13, 2023

A US national lab has started training a massive AI brain that could ultimately become the must-have computing resource for scientific researchers. Argonne N Read more…

Shutterstock 1179408610

Google Addresses the Mysteries of Its Hypercomputer 

December 28, 2023

When Google launched its Hypercomputer earlier this month (December 2023), the first reaction was, "Say what?" It turns out that the Hypercomputer is Google's t Read more…

Comparing NVIDIA A100 and NVIDIA L40S: Which GPU is Ideal for AI and Graphics-Intensive Workloads?

October 30, 2023

With long lead times for the NVIDIA H100 and A100 GPUs, many organizations are looking at the new NVIDIA L40S GPU, which it’s a new GPU optimized for AI and g Read more…

AMD MI3000A

How AMD May Get Across the CUDA Moat

October 5, 2023

When discussing GenAI, the term "GPU" almost always enters the conversation and the topic often moves toward performance and access. Interestingly, the word "GPU" is assumed to mean "Nvidia" products. (As an aside, the popular Nvidia hardware used in GenAI are not technically... Read more…

Shutterstock 1606064203

Meta’s Zuckerberg Puts Its AI Future in the Hands of 600,000 GPUs

January 25, 2024

In under two minutes, Meta's CEO, Mark Zuckerberg, laid out the company's AI plans, which included a plan to build an artificial intelligence system with the eq Read more…

Google Introduces ‘Hypercomputer’ to Its AI Infrastructure

December 11, 2023

Google ran out of monikers to describe its new AI system released on December 7. Supercomputer perhaps wasn't an apt description, so it settled on Hypercomputer Read more…

China Is All In on a RISC-V Future

January 8, 2024

The state of RISC-V in China was discussed in a recent report released by the Jamestown Foundation, a Washington, D.C.-based think tank. The report, entitled "E Read more…

  • arrow
  • Click Here for More Headlines
  • arrow
HPCwire