The Two Scariest Slides From IBM's Earnings Presentation

No one denies that IBM is in the middle of a major transformation, shifting away from shrinking hardware businesses and towards growth areas like cloud computing.

There are a lot of questions about what the company will look like when this transformation is done.

It's certainly possible that IBM CEO Ginni Rometty can pull it off. While IBM's revenue has consistently been shrinking for about two years, it remains a hugely profitable company. In 2014, it generated $12.4 billion in free cash flow. (Then again, it borrowed money to buy back shares, to keep its earnings per share up, spending $13.7 billion on that and earning criticism that IBM depends too heavily on financial engineering.)

The easiest way to way to see the shape IBM is in is from these two charts showing that every major business unit shrunk in its fourth quarter.

Every geography was down, too.

By the way, the fourth quarter is significant for enterprise companies like IBM, as salespeople push to close deals to make their annual quotas, and customers make purchases to finalize capital expenditure budgets.

But there are bright spots. So we'll throw a third chart at you to show those.

There's reasonable growth in the hot areas where IBM is investing. These are: cloud computing (which includes selling hardware and software to companies building their own clouds), "analytics" also known by the trendy term "big data," and mobile, helped by IBM's big agreement with Apple.

Revenue from these areas combined was up a total of 16%.