Tags: IBM | earnings | revenue | dollar

IBM Revenue Falls Short on Currency Moves, Slow Hardware Sales

Tuesday, 16 Oct 2012 04:29 PM

International Business Machines Corp., the biggest computer-services company, reported third-quarter revenue that fell short of estimates as currency fluctuations and slow hardware sales crimped results.

Revenue dropped 5.4 percent to $24.7 billion, Armonk, New York-based IBM said in a statement Tuesday. That missed the $25.4 billion average analyst estimate, according to data compiled by Bloomberg. Profit excluding some items rose 5 percent to $4.2 billion, or $3.62 a share. Analysts on average predicted $3.61.

Chief Executive Officer Ginni Rometty, in her first year on the job, is working to combat weak economic growth by expanding in emerging markets and shifting to higher-profit software and services, like data analysis and cloud computing. While the efforts have boosted IBM’s profit margins, revenue has remained little changed.

“The market really does want to see revenue increases, but that’s going to be based on market conditions,” said Laurence Balter, an analyst with Oracle Investment Research in Fox Island, Washington. “I just am a little bit cautious about the lack of confidence in the business sector,” said Balter, who has a hold recommendation on the stock.

Net income was little changed at $3.82 billion, or $3.33 a share.

IBM cited the divestiture of the company’s point-of-sale business to Toshiba Tec Corp., the Japanese maker of scanners and bar-code machines, during the quarter. The unit generated $1.15 billion in revenue last year. IBM also was ordered to pay an extra $160 million in retirement-related expenses in a ruling by the High Court in London, according to an Oct. 12 regulatory filing.

Stronger Dollar

The U.S. dollar was 13 percent stronger than the euro on average during the third quarter than a year earlier, according to data compiled by Bloomberg. That reduced the value of European sales. IBM got more than 30 percent of its 2011 revenue from Europe, the Middle East and Africa.

IBM shares fell as much as 3.8 percent in late trading. They rose 1 percent to $211 at the New York close and have gained 15 percent this year.

IBM is betting on four areas to add $20 billion in incremental revenue by 2015 as it shifts away from less- profitable hardware. The areas include cloud computing, for businesses to store data remotely on IBM servers; analytics software, for businesses to make decisions based on data analysis; “smarter planet,” for monitoring and improving infrastructure like traffic and water systems; and emerging markets, where the company plans to generate 30 percent of its revenue by 2015.

Even in its shrinking hardware business, IBM is designing solutions for new corporate needs. The company updated its PureSystems storage and networking technology with products that focus on business analytics. A new zEnterprise mainframe computer works better with cloud software and storage.

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International Business Machines Corp., the biggest computer-services company, reported third-quarter revenue that fell short of estimates as currency fluctuations and slow hardware sales crimped results.
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2012-29-16
Tuesday, 16 Oct 2012 04:29 PM
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