IBM Reports Mixed Results for the 2nd Quarter
- By Julie Young
Technology conglomerate International Business Machines Corp. (IBM) reported its second-quarter earnings on July 18 after the closing bell. The company missed revenue estimates and reported its 21st quarter of year-over-year decreasing revenue. Earnings for the quarter beat estimates by 23 cents.
Revenue for the quarter was $19.29 billion, missing estimates by $160 million and decreasing -4.7% from the comparable quarter. Earnings per share for the quarter were $2.97, beating estimates by 23 cents and increasing from $2.95 in the comparable quarter.
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The intrinsic value of IBM
IBM has steadily been releasing and developing new innovation in cognitive solutions built around IBM Watson. In the second quarter, cognitive solutions was a leading performance category for the company. It generated $5.2 billion in revenue and $1.6 billion in pre-tax income. It represented 25% of IBM's overall revenue. Revenue growth was -1% from the comparable quarter, reporting the company's best-performing business revenue results. It also reported the company's best category pre-tax income growth with a gain of 11% from the comparable quarter.
In financial services cognitive, IBM is leading the industry in innovation with its newly established Watson Financial Services business, which is being developed in partnership with Promontory Financial Group, the business IBM acquired in 2016.
For the quarter, technology services and cloud platforms reported the company's greatest portion of revenue with 42%. Global business services also reported significant revenue with 20%. In technology and business services, the company is also a market leader in blockchain innovation. In June, it announced a blockchain development project, called Digital Trade Chain, for seven of Europe's largest banks.
In executive comments on the earnings results, the company reported strategic imperatives revenue for the trailing 12 months of $34.2 billion, an increase of 11%. Cloud revenue was also reported for the trailing 12 months at $15.1 billion.
Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway (BRK-A) (BRK-B) continues to be a top shareholder of the company with 8.54% of its outstanding shares. Berkshire Hathaway's IBM holdings represent 10% of the firm's assets under management, which accounts for approximately $12.9 billion.
Disclosure: I do not own any shares of IBM.
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 3 Warning Signs with IBM. Click here to check it out.
The intrinsic value of IBM
