Red Hat drives paper-thin sales growth for IBM

Red Hat added more than $1bn in revenue to IBM in Q4

IBM has closed 2019 with wafer-thin sales growth, saved by a thriving cloud business propped up by its acquisition of Red Hat.

Revenues increased by a very slight 0.07 per cent for the fourth quarter of 2019 to $21.78bn (£16.58bn). For the full 2019 year, revenues edged forward by 0.2 per cent to $77.1bn adjusted for divested businesses and currency. Without these adjustments, revenues dipped by 3.1 per cent. Pre-tax operating income, however, dropped by 10 per cent to $10.17bn.

IBM's Cloud and Cognitive Software segment was the star performer in 2019, with the firm adding almost $1bn in revenues to this business unit year on year, representing 4.5 per cent growth.

The segment was largely helped along by its acquisition of Red Hat last year. Red Hat added more than $1bn in revenues to IBM's business in Q4 alone, equating to 24 per cent revenue growth - a record quarter for the business and an acceleration on its Q3 growth of 20 per cent.

IBM's Cloud and Data Platforms sub-segment, which includes Red Hat, grew revenues by 20 per cent.

Its Systems segment, which includes servers, mainframes and storage, had a good Q4 but a lacklustre overall 2019. Sales grew by 16 per cent in the last three months of the year to $3bn, driven by the success of its IBM Z mainframes which grew revenues by 63 per cent annually. Storage revenue grew by three per cent in Q4, claims IBM. But for the full year, Systems sales tanked by five per cent.

The market has responded positively to IBM's Q4 results, with its share price rising by more than five per cent in after-hours trading.