Tags: IBM | earnings | forecast | technology

IBM Won't Give Precise Earnings Goal After Ditching Forecast

Tuesday, 11 Nov 2014 03:47 PM

International Business Machines Corp. doesn’t plan to lock itself into another precise earnings forecast after ditching its long-held goal for 2015 profit.

Chief Financial Officer Martin Schroeter said IBM is unlikely to put in place another “absolute” earnings-per-share roadmap. He said there’s still value in laying out the complex company’s strategy for investors.

“We are going to have to be as transparent as we have been about the business and what it can earn over time,” Schroeter said Tuesday at an RBC Capital Markets investor conference.

Last month, IBM Chief Executive Officer Ginni Rometty tossed out the company’s goal to reach $20 a share in adjusted earnings by 2015 after sales dropped for a 10th straight quarter and demand for servers and other hardware dwindled. Rometty, who took over in 2012, had been trying to transform IBM while adhering to the five-year profit forecast laid out by her predecessor, Sam Palmisano.

The company has said it will provide an update on its financial projections in January.

IBM is under pressure to manage through a shift in corporate spending that has been a drag on revenue. Technology customers are increasingly moving data and software to the cloud, instead of on-site servers, lessening the demand for IBM hardware and the sales and maintenance staff who support it. The company has said it expects adjusted profit to fall this year for the first time since 2002.

Cloud Growth

To help accelerate that move, IBM is creating a separate business unit for its cloud-computing operations. Last month, IBM said that cloud offerings delivered as a service are at an annual run rate of $3.1 billion, compared with $2.8 billion as of the second quarter. That’s still a fraction of IBM’s $100 billion in revenue last year.

Schroeter today said the company still expects about $7 billion in cloud-related sales next year, with $3 billion of that coming from new offerings and the rest from old products shifted to be delivered via the cloud.

While IBM has used deals to bolster its cloud portfolio, Schroeter said he expects to fall short of the projection for $20 billion in acquisitions laid out in 2010. The technology giant isn’t looking to do a large, transformative takeover, Schroeter said today.

Acquisition Strategy

“We buy things to enhance what IBM can become,” he said. “So we’re not looking to be something else through an acquisition.”

IBM is trying to streamline itself to improve speed and agility, Rometty said in a memo to workers last month. The company has fired and furloughed employees, taking more than $1 billion in workforce restructuring charges this year. IBM has said it plans to cut more jobs, resulting in a fourth-quarter charge of as much as $600 million.

IBM shares fell 0.2 percent to $163.22 at 1:40 p.m. New York time. The stock was down 13 percent this year through Monday.

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International Business Machines doesn't plan to lock itself into another precise earnings forecast after ditching its long-held goal for 2015 profit.
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2014-47-11
Tuesday, 11 Nov 2014 03:47 PM
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