IBM (IBM) reported fourth-quarter results Wednesday that capped off a year of record earnings per share, revenue, profit and free cash flow. We continue to like IBM, but we are waiting for an entry point that captures an appropriate margin of safety before adding it to either our Best Ideas Newsletter or Dividend Growth Newsletter.
The firm’s revenue jumped a modest 2% (1% adjusting for currency) as an 8% decline in sales from Systems and Technology–due to the timing of product launches, namely the System z mainframe server–weighed down strong performance in Software, which advanced 9% due to strength in its middleware product suite (WebSpere, Tivoli, etc.). Geographically, sales in the
IBM’s non-GAAP gross profit margin edged up 1.1 percentage points, driving a 5% increase in non-GAAP operating income, to $5.6 billion. Non-GAAP net income during the fourth quarter came in at $5.6 billion (up 5%), while diluted earnings per share advanced 11%, to $4.71 per share. IBM pulled in roughly $9 billion in free cash flow during the quarter. We continue to be fans of IBM’s cash-flow generating prowess.
Looking ahead to 2012, IBM says it expects non-GAAP earnings per share of at least $14.85 per share, a threshold we think is easily achievable. Though performance may be weighed down by a slowing of IT spending and macroeconomic headwinds coming out of