IBM beats lower expectations
Cloud computing, data analytics add only 27% to results
IBM’s first- quarter profit beat analysts’ estimates that were already significantly lowered, helped by sales of its new mainframe and cloud- computing services.
Earnings excluding some items were $ 2.91 a share, Armonk, New York- based International Business Machines said in a statement. That compares with the $ 2.81 average of estimates compiled by Bloomberg. Sales of $ 19.59 billion missed projections for $ 19.64 billion.
Those estimates had already been cut in the past three months by 8.2 percent for profit and 4.4 percent for sales. Analysts began slashing estimates after CEO Ginni Rometty said in October that the company would fall short of a longheld profit goal.
IBM’s new initiatives like cloud computing, data analytics and social and mobile products accounted for only about 27 percent of the business last year. That’s not enough to make up for revenue lost through divestitures, falling sales for older software and services and weak demand in emerging markets like China.
Now, Rometty is taking more drastic measures to transform the 103- year- old company, like reorganizing the almost 380,000employee business to put a more intense focus on cloud.
“IBM has taken the right steps to realign its portfolio,” Maynard Um, an analyst at Wells Fargo Securities who rates the shares market perform, said in an April 14 note. Still, “the pressures from the declines in legacy businesses will remain higher over the near term.”
IBM rose 3.4 percent to $ 166.16 Monday, and added 0.2 percent in late trading, though it climbed as high as $ 171.27 following the earnings release. The stock has dropped 14 percent in the past year.
The strong dollar continued to drag on IBM’s results, with an 8 percentage point negative impact on sales, the company said.
Sales in services, IBM’s biggest business, fell 12 percent to $ 12.2 billion. The division’s revenue declined 2 percent adjusting for currency impact and divested businesses. Software sales fell 8 percent to $ 5.2 billion, or a 2 percent fall after adjustments.
Hardware sales percent as reported.
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