IBM International Business Machines Corp

By Ted Greenwald 

International Business Machines Corp. notched its 19th consecutive quarter of falling revenue, year on year, as it struggles to offset declines in older businesses with sales in younger ones that are growing at a rapid clip.

The Armonk, N.Y., computing giant said its fourth-quarter 2016 net profit edged up 0.9% as it posted $21.77 billion in revenue. It reported diluted earnings per share of $4.72 a share, or $5.01 excluding certain items. Analysts had expected adjusted earnings per share of $4.88 and revenue of $21.64 billion, according to a survey by Thomson Reuters.

For the full year, the company earned $13.59 adjusted earnings, in line with its forecast of at least $13.50, on $79.92 billion in total revenue.

For the year ahead, the company said it expects to deliver adjusted earnings per share of at least $13.80, above analysts' expectations of $13.74.

The company's shares fell 2% to $163.70 in after-hours trading.

Investors lifted IBM's share price 21% in 2016, more than double the S&P 500's performance, in a sign of confidence that its ship is turning toward renewed growth after a long wane. The company's traditional businesses selling equipment and services for on-premises corporate computing facilities have been shrinking as customers turn to off-premises computing. It has labored in recent years to shift from older operations that it calls "core" to new revenue streams that it has dubbed "strategic imperatives," such as analytics (including the Watson cloud-based artificial intelligence service), cloud computing, security, and mobile.

Sales from strategic imperatives in 2016 made up 41% of total revenue -- ahead of Chief Executive Ginni Rometty's prediction of 40% by 2018 and compared with 35% of revenue in 2015. The point at which these businesses to contribute more than half of revenue will represent a major milestone in the turnaround Ms. Rometty has sought since taking her post in late 2012.

Even at that point, however, profitability might remain an issue, as the pretax income margin on total segment revenue slipped in 2016 despite pockets of robust revenue growth in high-margin areas.

Write to Ted Greenwald at Ted.Greenwald@wsj.com

(END) Dow Jones Newswires

January 19, 2017 16:56 ET (21:56 GMT)

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