IBM Corp. has released a revenue forecast
for 2023 that is in line with analysts'
projections, indicating a cautiously
optimistic outlook for technology
spending amid an uncertain economic
climate. The company has predicted that
sales will increase by 3% to 5% in 2023,
meeting the estimates of analysts, and
has affirmed a previous free cash flow
forecast of $10.5 billion for the year.
While IBM reported Q1 revenue of $14.3
billion, which was little changed from the
same period last year and slightly below
analysts' average estimate, it exceeded
profit estimates, with earnings per share
of $1.36, excluding some items, versus
analysts' projection of $1.25 per share.
IBM's diverse portfolio of software
products and services is said to be helping
to offset the economic slowdown,
according to Anurag Rana, an analyst at
Bloomberg Intelligence. The software
business helped overcome conservative
expectations, thanks to stronger margins
and performance, as per Kyle McNealy, an
analyst at Jefferies.
Under the leadership of CEO Arvind
Krishna, IBM has been reorienting the
company around higher margin services
like hybrid cloud computing. While
consulting sales gained 2.8% to $5 billion,
the pace of such deals slowed in the
Americas region and may spread
elsewhere, Krishna said. Customers are
not yet canceling projects but delaying
them, he added.
Krishna said that productivity measures
and expense management taken earlier in
the year contributed to IBM exceeding
profit estimates, and new steps towards
productivity and efficiency are expected
to drive $2 billion in savings annually by
the end of 2024. However, the company
may increase job cuts to 5,000 once
finished, rather than the previously
announced 3,900.
IBM has made divestitures a core part of
its transformation plan, with recent
spinoffs of Kyndryl Holdings Inc. and part
of the Watson Health business. It is now
considering selling its weather unit.
Meanwhile, GlobalFoundries Inc., which
acquired IBM's semiconductor business
in 2015, has sued IBM, alleging that the
company continued to monetize
intellectual property from that business
unit after the deal's completion.
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