IBM posts 14th consecutive quarter of falling revenue
IBM blames the sale of high volume, low margin businesses and currency shifts, but cloud and services struggle to make up the shortfall
IBM has posted its 14th consecutive quarter of declining revenue, following the sale of struggling and low-margin businesses in a long-running restructuring masterminded by CEO Ginni Rometty.
Total revenue from "continuing operations" - which strips out the revenues of divested units, particularly the System x low-end server unit, sold to Lenovo - fell by 14 per cent in the quarter to $19.28bn, below analysts' average forecasts of $19.6bn. Net income also fell, from $3.5bn to $3bn. The company's shares fell by just under five per cent in response.
IBM chief financial officer Martin Schroeter attributed the disappointing results to lower than expected revenues from the company's consulting and storage businesses, while currency movements also cut the company's revenues in US dollars, the currency in which it reports.
Global Technology Services revenues were down by 10 per cent to $7.9bn, and software sales also fell by 10 per cent, to $5.1bn. But the most spectacular decline was seen in hardware, where total revenues falling by 39 per cent to $1.5bn, largely due to the sale of System x. Sales of the mainframe z System hardware, though, was up by 15 per cent.
Despite the sales falls, Rometty remained upbeat.
"In the third quarter we again made progress in the transformation of our business to higher value, with strong growth in our strategic imperatives and expanded operating margins," she said. "We are continuing to make significant investments to build platforms around analytics, cloud, mobility and security that lay the foundation for a new era of cognitive business - where we see long-term value for our clients and shareholders."
Indicating either the after-effects of the Edward Snowden disclosures or, equally likely, an emerging economic recession, China sales fell by 17 per cent, with the company suggesting that this was because there were fewer big deals there. Sales from the BRICs combined - Brazil, Russia, India and China - fell by 30 per cent, but IBM was keen to assert that the fall was just seven per cent when System x revenues and currency fluctuations were stripped out.
"This is another example of the massive headwinds that large-cap traditional tech stalwarts are seeing in this ever-changing environment, as more customers move to the cloud," FBR Capital Markets analyst Daniel Ives told Reuters.
Indeed, IBM is not the only major technology vendor that is currently struggling as organisations look to cloud as a way to cut capital spending, and open source for many areas where they once would have automatically bought proprietary software, such as in databases.