You are here

IBM revenue falls more than expected, cuts profit forecast

ibm.jpg
International Business Machines Corp posted a bigger-than-expected drop in revenue for the fifth straight quarter, hurt by a strong US dollar, and cut its full-year profit forecast, sending its shares lower.

[LONDON] International Business Machines Corp posted a bigger-than-expected drop in revenue for the fifth straight quarter, hurt by a strong US dollar, and cut its full-year profit forecast, sending its shares lower.

It was the 14th quarter in a row that IBM has posted a reduction in revenue, as the world's largest technology services company gets rid of low-margin businesses and looks to expand its more lucrative cloud computing business, helping companies manage their data remotely.

Shares of IBM fell 4.8 per cent in after-hours trading to US$141.95. "This is another example of the massive headwinds that large-cap traditional tech stalwarts are seeing in this ever-changing environment, as more customers move to the cloud,"FBR Capital Markets analyst Daniel Ives said.

China was particularly hard hit, with fewer big deals causing revenue from that country to fall 17 per cent, IBM's chief financial officer said on a conference call with analysts.

sentifi.com

Market voices on:

IBM lowered its full-year 2015 operating profit forecast to a range of US$14.75 to $15.75 per share from US$15.75 to US$16.50. Analysts on average were expecting US$15.68, according to Thomson Reuters I/B/E/S.

The company is shifting away from hardware to the cloud, much like established rivals such as Oracle Corp and Microsoft Corp. Each is striving to boost Internet-based software and services sales to compete with Salesforce.com Inc and Amazon.com Inc's web software unit.

In August, IBM said it would buy medical image company Merge Healthcare Inc in a US$1-billion deal and combine it with its newly formed health analytics unit, which is powered by its famous Watson supercomputer.

Revenue from what the company calls "strategic imperatives,"which include cloud and mobile computing, data analytics, social and security software, rose about 17 percent in the third quarter ended Sept 30.

Yet the new businesses have so far failed to make up for revenue lost to divestitures. The company known as 'Big Blue'has been selling low-margin businesses such as cash registers, low-end servers and semiconductors to focus on high-growth areas such as security software and data analytics, besides cloud-based services.

The sale of these businesses and a strong dollar ate into revenue. IBM's total revenue fell 13.9 percent to $19.28 billion in the quarter, while analysts on average were expecting US$19.62 billion.

Armonk, New York-based IBM gets more than half its revenue from overseas. The average value of the dollar against a basket of currencies in the third quarter was about 17 per cent higher than the same quarter last year.

Even adjusted for currency and divestitures, the company's revenue fell 1 per cent.

IBM's net income from continuing operations fell to US$2.96 billion, or US$3.02 per share, from US$3.46 billion, or US$3.46 per share, a year earlier.

Consolidated net income rose to US$2.95 billion, or US$3.01 per share, from US$18 million, or 2 cents per share, a year earlier.

Last year profit was hurt by non recurring pre-tax charge of US$3.3 billion, net of tax, for discontinued operations.

Excluding items, IBM earned US$3.34 per share from continuing operations in the latest quarter, beating the average analyst estimate of a profit of US$3.30 per share.

Up to Monday's close, IBM's shares had fallen about 7 per cent this year.

REUTERS

grab

Receive $80 Grab vouchers valid for use on all Grab services except GrabHitch and GrabShuttle when you subscribe to BT All-Digital at only $0.99*/month.

Find out more at btsub.sg/promo

Powered by GET.comGetCom