IBM delivers mixed quarterly report
IBM delivered a mixed and somewhat unsettling quarterly performance Tuesday. Profits barely exceeded Wall Street's expectations, while revenue fell well below.
The results, analysts said, were unlikely to reassure investors concerned about the global outlook for technology spending. In a conference call with analysts, Mark Loughridge, IBM's chief financial officer, said the revenue shortfall came from a slowdown in business, especially in September, in certain markets including the United States, where revenue fell 5 percent.
''It was surprisingly disappointing," said A.M. Sacconaghi, an analyst at Sanford C. Bernstein. "All the businesses were light."
In after-hours trading, IBM shares fell $7.10 a share, or 3.4 percent, to $203.90. In the regular session, the company's stock price rose 1 percent, or $2.07 a share, to close at $211.00 a share.
IBM is the world's largest supplier of information technology — computer hardware, software and services — to corporations and governments. So the company's results are watched as a gauge of technology spending trends.
IBM has steadily shifted its business in recent years to software and services. IBM has also shed hardware businesses with low profit margins, including personal computers and disk drives. The strategy, analysts note, has been a disciplined focus on profit growth rather than enlarging its yearly revenue.
For the third quarter, net income was flat at $3.8 billion. The reported net profit included a $160 million charge to take account of a London court ruling against IBM last week involving pensions.
The company's operating profit of $3.62 a share, up 10 percent from the year-ago quarter, came in just above the average estimate of analysts of $3.61 a share, compiled by Thomson Reuters.
Revenue for the quarter fell 5 percent to $24.7 billion, well below the Wall Street consensus of $25.4 billion. Excluding the effect of currency translation, revenue fell 2 percent in the quarter.
The company's gross profit margin rose 1.2 percent from the year-earlier quarter, to 48.1 percent.
In a statement, Virginia M. Rometty, IBM's chief executive, pointed to the solid profit performance.
''In the third quarter," Rometty said, "we continued to drive margin, profit and earnings growth through our focus on higher-value business, strategic growth initiatives and productivity."
IBM reiterated its forecast for the year of operating earnings per share of "at least $15.10." Some analysts had expected IBM to raise its guidance for the year, if the quarter showed encouraging strength.