NEW YORK (AP) — IBM’s first-quarter earnings fell and
revenue came in below Wall Street’s expectations amid an ongoing decline
in its hardware business, one that was exacerbated by weaker demand in
China and emerging markets.
The world’s largest technology
services company has been working to expand into new areas as its
hardware business falters, but the latest results show that these
efforts have yet to fully pay off.
The company in the process of
selling its low-end server business to China’s Lenovo Group as it
continues to shift its focus toward more lucrative software and
services. It is also investing heavily in Internet-based computing
services and in Watson, its cognitive computing operation made famous in
beating a pair of "Jeopardy!" champions.
IBM Corp. said Wednesday
that it earned $2.38 billion, or $2.29 per share, in the January-March
period. That’s down 21 percent from $3.03 billion, or $2.70 per share, a
year earlier. Excluding an $870 million charge for reorganizing its
work force and other one-time items, IBM’s earnings were $2.54 per share
in the latest quarter, matching analysts’ expectations.
Revenue
fell 4 percent to $22.5 billion, below the $22.9 billion that analysts
polled by FactSet had expected. It’s the eighth consecutive quarter of
revenue decline. The biggest drop was in its systems and technology
unit, or hardware, where revenue tumbled 23 percent to $2.39 billion
from $3.11 billion.
IBM’s stock fell 4 percent after the results came out.
"Hardware
was a lot worse than I thought," said Daniel Morgan, a Synovus Trust
portfolio manager who focuses on technology. He was expecting a 12
percent decline and said IBM is "really getting hurt" by the slowdown in
China and emerging markets.
Software, on the other hand,
performed better than he had expected. IBM said revenue in this business
grew 2 percent to $5.66 billion from $5.57 billion. Morgan said he had
expected a decline of less than 1 percent.
Revenue at its biggest segment, technology services, slipped 3 percent to $9.33 billion.
"In
the first quarter, we continued to take actions to transform parts of
the business and to shift aggressively to our strategic growth areas
including cloud, big data analytics, social, mobile and security," said
CEO Ginni Rometty in a statement. ""As we move through 2014, we will
begin to see the benefits from these actions."
IBM laid off an
undisclosed number of workers in the past year, though it has also hired
in other areas. It ended 2013 with 431,212 employees, down less than 1
percent from the end of 2012.
For the full year, IBM still expects adjusted earnings of at least $18 per share. That’s higher than
estimates of $17.88.
Shares of Armonk, N.Y.-based IBM fell $8.20 to $188.20 in extended trading. Earlier, the stock had closed
at $196.40.
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