We just got Ginni's email about fourth quarter results. As usual it is all sunshine. What really happened?
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35% was the marginal rate. Now apologize.
Ironically, it's the "old" IBM that saved her. Without that bump we'd be looking at the 23rd negative quarter. "Thanks mainframe - I love you - now die!"
Earnings came in almost exactly where everyone expected. Mainframe gave us a bump, and will continue on for at least 2 more quarters. Services were disappointing THUS the merger of GTS/GBS. (Eg we are going to move the 120 billion in backlog to the cloud and dump 15-25k worth of heads). Those dumping of heads will easily offset the increased taxes. The real question is how do we part out the legacy services vs the cloud services. My guess is now that Ginni has gotten her win, she will very much accelerate the parting out claiming we have turned the corner and the “new” IBM is here. To do that the old IBM must be off loaded
Aftermarket trading, the price is off about $7... That is 4% or 5%...
Earnings call is still underway as I write this, but now there's word that IBM included some kind of very sketchy huge writeoff for 4Q related to the new tax law, and without that the results for 4Q would have been completely disastrous. The analysts aren't fooled that easily.
As usual it's all BS. Check the stock pages - IBM shares are way down aftermarket trading because the quality of earnings were poor, mainly due to currency headwinds and a bump from the mainframe refresh, which only happens every two and a half year. Also the tax reform will hurt IBM, not allowing them to keep claiming a 6% tax rate (hey, didn't the Donald say the corps can't compete because they're paying 35%?). The smart money knows these earnings were bad, even though the finally stopped the 22 straight quarters of revenue decline, but only due to the above and financial engineering. Get ready for the RA, my bet is tomorrow or early next week.