Some good results from Big Blue in an extremely tough environment. Across the board there was strength in the key areas, including 80% growth in cloud computing (a segment we want to see IBM as a leader). In terms of numbers, EPS growth was 10% for the full year, to $14.37, while net profits rose 5% (the difference is the amount of stock repurchased). Even more impressive, gross margins were up 1.8 points to 51.8%.

To put these numbers into perspective, total revenue was down 1% year/year for both Q4 and full year 2012 results. Acting as a bellwether for the overall economy, and the tech sector in particular, 2012 represented perhaps the toughest environment for the company in this “recovery” period. In January 2012, IBM forecast full year EPS at $14.85, so the company came up short to initial expectations. But given the lackluster revenue environment, delivering an increase in margins and profits was not a sure thing.

IBM’s segments were relatively robust in software, hardware and “growth markets”, while traditional, business-oriented segments took the brunt of the economic weakness. Servers, for example, saw no growth in revenue year/year.

Geographically, results were as you might expect: flat in the Americas, -5% in Europe/ME/Africa, +4% Asia-Pacific. Given that environment, Global Technology revenue was down 2%, while Global Business Services revenue was down 3%.

Riding the profit margin improvement, free cash flow increased to $18.2 billion (+12%), underscoring the fact that the company is, perhaps just shy of Apple, the biggest cash cow in the tech business.

All that being said, IBM still faces a tough economic environment globally. Current year guidance (2013) was relatively robust given current economic constraints, but, as we saw with guidance from a year ago, is far from certain. Slower business spending in the US and continued contraction in Europe will likely weigh on revenue growth again this year, putting more pressure on IBM margins and cost structure maintenance. The company will also need to see continued high growth rates in its “growth market” segments (including cloud services).

Despite these challenges, Big Blue is a robust company that has proven it can squeeze performance from less-than-ideal climates. The good news is that most of the negative aspects of the earnings performance are macro-driven rather than idiosyncratic. That means IBM is likely very well positioned (still) relative to peers.