On Jan. 18, titanic technologist IBM (NYSE:IBM) released fourth-quarter 2006 earnings for the period ended Dec. 31, 2006.

  • 7.5% revenue growth isn't overly impressive, but improved operational efficiency and a generous share buyback program delivered a 16% bottom-line gain -- and free cash flow is growing even faster.
  • The cash flow boost didn't happen by skimping on infrastructure expenses, either, and only a handful of companies -- automakers and drug giants, mostly -- can match IBM's $1.6 billion quarterly research budget.
  • Wall Street analysts seem to like Big Blue a lot, with 15 buy ratings versus one sell recommendation, but our own CAPS community disagrees and hands the company two measly stars. Who's right? Weigh in here with your own take.

(Figures in millions, except per-share data)

Income Statement Highlights

Q4 2006

Q4 2005

Change

Sales

$26,257

$24,427

7.5%

Net Profit

$3,541

$3,187

11.1%

EPS

$2.31

$1.99

16.1%

Diluted Shares

1532.5

1604.8

(4.5%)


Get back to basics with a look at the income statement.

Margin Checkup

Q4 2006

Q4 2005

Change*

Gross Margin

44.6%

45.1%

(0.6)

Operating Margin

18.3%

18.7%

(0.4)

Net Margin

13.5%

13.1%

0.4
*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Management Effectiveness

Q4 2006

Q4 2005

Change*

Return on Average Assets

13.7%

12.3%

1.3

Return on Average Equity

45.1%

40.3%

4.9
*Expressed in percentage points.

See how management puts its financial tools to work.

Balance Sheet Highlights

Assets and Liabilities

Q4 2006

Q4 2005

Change

Cash + ST Invest.

$10,657

$13,686

(22.1%)

Long-Term Debt

$13,780

$15,425

(10.7%)


Learn the ways of the balance sheet.

Cash Flow Highlights

Q4 2006

Q4 2005

Change

Cash From Ops.

$5,624

$3,614

55.6%

Capital Expenditures

$1,924

$1,045

84.1%

Free Cash Flow

$3,700

$2,569

44.0%


Find out why Fools always follow the money.

Related Companies:

  • Accenture (NYSE:ACN)
  • Intel (NASDAQ:INTC)
  • Microsoft (NASDAQ:MSFT)
  • Hewlett-Packard (NYSE:HPQ)
  • Sun Microsystems (NASDAQ:SUNW)
  • Cisco Systems (NASDAQ:CSCO)

Related Foolishness:

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Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Fool contributor Anders Bylund had no position in any company mentioned. Fool rules are here.