Updated from 8:01 a.m. to include notes from Herb Greenberg, updated share price and related video.

NEW YORK (TheStreet) -- IBM (IBM) shares were plunging 3.1% to $182.53 in early trading Wednesday as the software and services giant reported fourth-quarter earnings that beat Wall Street estimates, but concerns over the company's business continued to weigh on investors' minds.

Fourth-quarter results for the Armonk, N.Y.-based firm showed earnings of $6.13 a share on $27.7 billion in sales, well short of the $28.25 billion analysts were expecting. Cloud and software continued to help IBM's hardware business, as cloud revenue jumped 69% year over year to $4 billion. Revenue from software rose 3% to $8.1 billion, but Systems and Technology revenue plunged 26% year over year to $4.3 billion.

IBM Chart

Reports came throughout the day Tuesday that IBM is looking to divest its x86 server segment, with both Dell and Lenovo reported to be among the suitors.

For the 2014 fiscal year, IBM expects operating earnings of at least $18 a share, compared to $16.28 a share for 2013. Analysts surveyed by Thomson Reuters are looking for full year earnings of $18.02.


Despite the earnings beat, Wall Street analysts were largely unmoved, as the company's tax rate during the fourth quarter helped boost earnings considerably, and concerns about the company's business model continue to weigh on sentiment. TheStreet's Herb Greenberg noted that Wall Street is getting tired of IBM's managed earnings and is begging the company to show revenue growth.

Here's what several analysts on Wall Street had to say:

BMO Capital Markets analyst Keith Bachman (Market Perform, $195 PT)

"We remain Market Perform rated on IBM, and maintain our target price of $195. Based on our EPS estimates, IBM stock appears inexpensive based on 11x our FY14 estimate and 10x our newly introduced FY15 estimates. However, based on EV/FCF, IBM trades at a multiple that is expensive, in our opinion, at 15x our FY15 FCF estimate of $15.7 billion (GAAP FCF estimate). Therefore, we do not see the valuation as overly compelling. Further, IBM continues to miss our and Street revenue estimates, which we believe will continue. Until IBM can both meet consensus revenue estimates and deliver y/y revenue growth, we don't think the stock can work."


JPMorgan analyst Mark Moskowitz (Neutral, $175 PT)

"We expect shares of Neutral-rated IBM to be under pressure in the near term. The company's 4Q13 results were mixed, particularly when adjusting for the lower tax rate. Moreover, the 1Q14 EPS outlook of roughly $2.50 implies a big hill to climb to achieve IBM's full year EPS target of 'at least' $18. Prior to the earnings call, 1Q14 consensus and J.P. Morgan estimates had been $3.29 and $3.39."

Jefferies analyst Peter Misek (Hold, $190 PT)

"IBM recommits to $20 2015 EPS target while acknowledging the need to accelerate retooling and cost-cutting efforts. Software and Services were relative highlights; Hardware was the lowlight, especially China (again). We maintain our $18 2014 EPS est (in line with guidance) and $190 target."

Cantor Fitzgerald analyst Brian White (Buy, $220 PT)

"Last night, IBM reported 4Q:13 results that exceeded our projections, and the company provided what we consider a palatable 2014 EPS outlook, while maintaining its 2015 EPS projection. Although IBM warned of weak EPS performance in 1Q:14, this softness versus our estimate is driven by a restructuring charge that most tech companies would exclude from operating performance. Based on current estimates, our model now suggests that IBM's sales cycle bottomed in 4Q:13, and we are projecting the operating profit cycle to trough in 1Q:14, providing us with a view that the worst is over for IBM in the intermediate term. As such, we reiterate our BUY rating and $220.00 price target."

-- Written by Chris Ciaccia in New York

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