IBM misses Wall Street forecasts on both revenues and profit

The IT bellwether fails to achieve goals in first-quarter.

New Statesman
Photograph: Getty Images.

IBM has posted total revenues of $23.4bn for the first-quarter ended 31 March 2013, a decrease of 5 per cent compared to the same period last year, falling short of Wall Street’s $24.7bn estimate.

Net income on GAAP basis was $3bn, a year-on-year decrease of 1 per cent. Revenues in growth markets also fell 1 per cent, including in China and Russia.

Sales in services business declined by 4 per cent to $9.6bn, while hardware revenues tumbled by 17 per cent to $3bn.

Gross profit margin, however, grew by 0.6 points to 45.6 per cent. Operating earnings per share were $3 against analysts’ forecasts of $3.05.

In an effort to make up lost ground, the company is planning to restructure its workforce and divest certain businesses in 2013. The company, although, is still on track to meet its full-year and long-term targets.

Admitting failure to achieve all the company’s goals in the first-quarter, Ginni Rometty, CEO of IBM, said: “Despite a solid start and good client demand we did not close a number of software and mainframe transactions that have moved into the second quarter. In addition to closing those transactions, we expect to benefit from investments we are making in our growth initiatives and from the actions we are taking to improve underperforming parts of the business.”

Mark Loughridge, CFO of IBM, cited the weak yen, Chinese leadership changes and an earlier Easter holiday factors for its miss, admitting a shortfall in sales execution as partly responsible.

“There are parts of our business in transition, that have been underperforming, that are going to take some time to recover,” Loughridge added, referring to power and storage lines.

IBM declined to comment on the possible sale of its x86 server business that could fetch billions of dollars.

Meanwhile, IBM stocks fell 4 per cent in after-hours trading.