Down, down, deeper and down: IBM shrinks for the 15th consecutive quarter

Status quo continues to be disrupted at IBM as revenues, profits and margins all head south. Again

IBM's latest quarterly results show yet another revenue and profits decline, with the company shrinking for the 15th consecutive quarter in a row.

Revenues were down almost entirely across the board, meaning that IBM CEO Ginni Rometty couldn't pin the blame on the divestiture of the System x low-end server business.

Total revenues fell by 8.5 per cent from $24.1bn to $22.1bn in the fourth quarter, while for the full year the decline was even more stark - down by 11.9 per cent from $92.8bn to $81.7bn. Gross profit also fell, from $46.4bn to $40.7bn for the full year, down by 12. 3 per cent.

Naturally, CEO Ginni Rometty claimed that "significant progress" was being made in her plan to guide IBM to "higher value" business - hence the divestiture of hardware and the acquisitions of companies specialising in cloud computing.

"In 2015, our strategic imperatives of cloud, analytics, mobile, social and security grew 26 per cent to $29bn and now represent 35 per cent of our total revenue," said Rometty. "We strengthened our existing portfolio while investing aggressively in new opportunities like Watson Health, Watson Internet of Things and hybrid cloud. As we transform to a cognitive solutions and cloud platform company, we are well positioned to continue delivering greater value to our clients and returning capital to our shareholders," she claimed.

All regions experienced declines in revenues, but they were sharpest in the BRIC - Brazil, Russia, India and China - countries, which only a few years ago had been growing strongly. Faltering sales in these countries may be partly due to post-Snowden distrust of US technology vendors, but more likely down to their faltering economies.

Hardware, which had once been a mainstay of IBM's business, now represents just a fraction of the company. Revenues from the Systems Hardware segment totaled $2.4 billion for the quarter, down 1 per cent. For the full year, hardware sales were down by 24.2 per cent, from $10bn to $7.6bn. However, due to the sale of System x, it was the only unit that posted a rise in profit margins.

Indeed, perhaps most damning of all for Rometty was the decline in profit margins in all other areas. When she was made CEO one of her stated aims was to increase the profitability of the company. Instead, while divesting low-margin businesses she has also presided over a decline in margins across the continuing businesses.

"Guidance for 2016 does not inspire confidence, with an annual earnings per share figure of $13.50 being well below earlier expectations. Global Technology Services looks as if it will lead better performance as cloud volumes grow (particularly via Softlayer), but the outlook for margins is unlikely to be very positive," noted TechMarketView analyst Peter Roe.