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Must-Know: A Review of IBM’s 4Q14 and Fiscal Year 2014 Earnings

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4Q14 earnings overview

On January 20, 2015, IBM (IBM) announced its fiscal 4Q14 and fiscal year 2014 results. IBM reported revenues of $24.1 billion and $92.79 billion for 4Q14 and fiscal year 2014, respectively. Revenues declined 11.94% in 4Q14 and 5.94% in fiscal year 2014 on a year-over-year basis. For 4Q14 and fiscal year 2014, EPS (or earnings per share) stood at $5.81 and $16.53, respectively.

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Performance by operating segment

In 4Q14 and fiscal year 2014, IBM’s core software business revenue stood at $7.6 billion and $25.4 billion, respectively. On a quarterly as well as yearly basis, software revenues declined by 7% and ~2%.

In 4Q14, Global Technology Services (or GTS) and Global Business Services (or GBS) revenues stood at $9.2 billion and $4.3 billion, respectively. Both of these segments’ revenues reported a decline of 8% on a year-over-year basis. In fiscal year 2014, GTS and GBS reported $37.1 billion and $17.83 billion, respectively. Both the segments saw a decline of 3.7% and 3.1%, respectively.

In 4Q14 and fiscal year 2014, IBM’s system and technology division reported revenues of $2.4 billion and $10 billion, a decline of 39% and 23% on a year-over-year basis, respectively. In 4Q14 and fiscal year 2014, IBM’s Global Financing revenues stood at $532 million and $2.03 billion, respectively. The above presentation shows the contribution of IBM’s various operating segments towards the company’s overall revenues.

In 4Q14, in constant currency terms, software business, GTS, GBS, and the system and technology segment reported a decline of 3%, 2%, 3%, and 12%, respectively.

In its 4Q14 earnings release, IBM stated that it expects cloud services to contribute $7 billion in revenues by 2015. Amazon (AMZN) dominates the cloud space with a 30% market share. Microsoft (MSFT) and Google (GOOG) are other leading players in the cloud space.

Geographical performance

In 4Q14, Americas, Europe, Middle East & Africa (or EMEA), and Asia-Pacific revenues stood at $41.41 billion, $30.7 billion, and $20.222 billion, respectively. These geographical regions declined by 4.3%, 2.9%, and 11.8%.

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