Andrew Lange: Overall, our expectations leading into IBM's fourth quarter were anything but stellar. However, the company managed to surprise us with slightly better than expected revenue growth.
A couple of bright spots were apparent, with global business services, or GBS, outperforming sales expectations and the company's systems business managing to decline slower than we had forecast. We think the performance from GBS was particularly notable and supports our opinion that IBM as well as Accenture, remain the premier global IT services firms. We believe IBM's consulting and digital transformation skills are key assets for the firm, and we continue to see midterm growth tailwinds for this business after prior years of restructuring.
The firm provided an in-line outlook for fiscal 2019, and while it was a solid end to the year, our fair value estimate remains unchanged at $158 per share. Systems revenue was down significantly, but this was expected due to the highly cyclical nature of this business and the fact that the z14 mainframe is now at the tail end of its cycle.
Analytics and artificial intelligence software helped boost cognitive solutions, and as we look at the next year and beyond, we think IBM's recent $1.8 billion software sale to HCL will help to lessen IBM's legacy exposure and reinvigorate the subsequent growth profile of the cognitive solutions business.
Technology services and cloud platforms remain mixed, and we think this will be the case for at least the near term, with IBM looking to exit lower value infrastructure work.