International Business Machines Corporation (NYSE:IBM) Q4 2016 Earnings Conference Call Transcript

Jan 19, 2017 • 05:00 pm ET


International Business Machines Corporation (NYSE:IBM) Q4 2016 Earnings Conference Call Transcript


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Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. Today's conference is being recorded. (Operator Instructions)

Now, I will turn the meeting over to Ms. Patricia Murphy, VP of IR. Ma'am, you may begin.

Patricia Murphy

Thank you. And good afternoon, good evening, good morning depending on where you are. This is Patricia Murphy, VP of IR for IBM. I'm here today with Martin Schroeter, IBM SVP and CFO. I'd like to welcome you to our fourth-quarter earnings presentation. The prepared remarks will be available within a couple of hours and a replay of the webcast will be posted by this time tomorrow.

(Forward-Looking Cautionary Statements)

Our presentation also includes certain non-GAAP financial measures, in an effort to provide additional information to investors. All non-GAAP measures have been reconciled to the related GAAP measures in accordance with SEC rules. You will find reconciliation charts at the end of the presentation and in the Form 8-K submitted to the SEC.

So with that, I'll turn the call over to Martin Schroeter.

Martin Schroeter

Thanks, Patricia. As is typical in January, I'll start out with some top-level comments on the quarter and the year, discuss the details of the quarter, and then conclude with our view of 2017.

In the fourth quarter, we delivered revenue of $21.8 billion, operating net income of $4.8 billion, and operating earnings per share of $5.01, which is up 3.5%. There are significant opportunities and shifts in our industry and we believe that to be successful with enterprise clients, you need to bring together cognitive technologies, on cloud platforms that create industry-based solutions to solve real-world problems.

So with that very brief context around our point of view, let me comment on what we achieved in the full year of 2016. We made progress in building new businesses and creating new markets and continued to deliver strong results in our strategic imperatives.

We invested at a high level and remixed our skills to address these new opportunity areas. We also continued to innovate in the businesses that we have traditionally provided to our clients.

We returned capital to our shareholders and we achieved the earnings and free cash flow expectations we set last January, with $13.59 of operating earnings per share and free cash flow of $11.6 billion, which is 97% of GAAP net income.

So we did what we said we would do in a year not only with a lot of change in the industry, but also a year with a number of macro conditions and events, particularly in countries that are meaningful to our results. I'll cover our expectations shortly, but right up front I'll say that we are exiting 2016 in a stronger position than we entered it, and that is reflected in our 2017 guidance.

Looking at some of the highlights of the fourth quarter, we had terrific growth in cloud, with revenue up 33%. We also had good growth in our analytics, security, and mobile solutions.

We are