IBM Jumps On "Strongest Revenue Growth In A Decade", But A Closer Looks Reveals Same Old Accounting Gimmicks

First a quick reminder that today's results were the first since IBM completed the spinoff of a large portion of its legacy infrastructure services unit in November into a new company called Kyndryl, which includes service operations like managing client data centers and traditional information-technology support.

So what's going on here? Has IBM miraculously changed course, and is it no longer a melting ice cube? Of course not - one just has to look at the fine print to understand what is going on: as IBM reveals, the $2.5BN in net income, consisted of $1.5 billion in pre-tax charges for structural actions in Q4. Translation: more than half of the company's Q4 earnings was an pro forma addback!

Since all the historical data is apples to oranges with the separation of Kyndryl serving as the divider line, and since historical data prior to the separation remains unadjusted, IBM was proud to boast that its Q4 revenue was $16.70 billion, beating the estimate of $16 billion and up 6.5% compared to Q4 2020.... ... even though in absolute terms IBM's revenue looks like this.

Consulting segment revenue $4.75 billion, +13% y/y.

Software revenue $7.27 billion, +8.2% y/y.

Commenting on the quarter, Chairman and CEO Arvind Krishna said that "We increased revenue in the fourth quarter with hybrid cloud adoption driving growth in software and consulting. Our fourth quarter results give us confidence in our ability to deliver our objectives of sustained mid-single digit revenue growth and strong free cash flow in 2022.".

IBM ended the year with $7.6 billion of cash on hand, down $6.7 billion from year-end 2020, reflecting acquisitions of $3.3 billion and debt reduction payments consistent with the company's previously-stated intention to deleverage.

https://www.zerohedge.com/markets/ibm-jumps-strongest-revenue-growth-decade-closer-looks-reveals-same-old-accounting-gimmicks