Tags: IBM | Sales | Slide | Bonus

IBM's Sales Continue to Slide; Executives Forgo Bonuses

Tuesday, 21 January 2014 05:34 PM

International Business Machines Corp., the world’s biggest computer-services provider, reported a seventh straight sales decline amid plunging demand for hardware, prompting top executives to forgo bonuses this year.

Revenue fell to $27.7 billion in the fourth quarter, the Armonk, New York-based company said Tuesday in a statement. That missed the $28.3 billion projected by analysts, according to data compiled by Bloomberg.

IBM is shifting to more profitable businesses such as cloud computing and data analytics, aiming to compensate for the hardware slump. Chief Executive Officer Ginni Rometty also has slashed expenses through job reductions and the sale of lower-margin businesses. Though these efforts are making progress, the results led Rometty to opt against bonuses, she said.

“In view of the company’s overall full year results, my senior team and I have recommended that we forgo our personal annual incentive payments for 2013,” she said.

IBM’s shares fell as much as 3.7 percent in late trading after closing at $188.43 in New York. The stock declined 2.1 percent in 2013, making it the only loser in the Dow Jones Industrial Average.

Even so, the company exceeded profit estimates last quarter, helped by the cost cutting and software growth. Excluding some items, earnings climbed to $6.13 a share, IBM said. Analysts had estimated $6 on average. The company is targeting adjusted earnings of $20 a share by 2015.

CFO Change

Chief Financial Officer Mark Loughridge, the longest-serving CFO in IBM’s 103-year history, retired at the end of 2013. That puts the company’s profit goals under the purview of his successor, Martin Schroeter.

IBM is seeking to benefit from a shift to cloud services, which are delivered online rather than via local computers. Still, the transition has brought a new crop of competitors and eroded demand for traditional hardware.

In her biggest acquisition since taking over as CEO two years ago, Rometty bought cloud-computing storage company SoftLayer Technologies Inc. in 2013 for about $2 billion. Now IBM is upping its bet with a plan to invest $1.2 billion in the cloud-services business this year, the company said last week.

Watson Business

The move follows IBM’s announcement this month of a new business division around its Watson supercomputer, which can analyze large volumes of data and answer questions in conversational language. IBM will invest more than $1 billion in the unit and set up its own headquarters in New York. Watson’s big-data services, which let customers mine vast troves of information, will be run on SoftLayer’s cloud.

While IBM plans to focus more on SoftLayer and Watson, the company may face challenges in meeting is earnings goals, Maynard Um, an analyst at Wells Fargo & Co., said in a note to investors. He has a neutral rating on the shares.

“It has faced some macro and execution challenges and, in our view, has fewer levers to drive EPS without revenue growth,” he said.

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IBM reported a seventh straight sales decline amid plunging demand for hardware, prompting top executives to forgo bonuses this year.
Tuesday, 21 January 2014 05:34 PM
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