IBM (IBM) Shares Fall after a Missing on Revenue

Shares of International Business Machines Corp. (IBM) were trading down -8.76 or -5.06 percent to $164.46 in premarket trading on Tuesday after the company reported mixed numbers for its second quarter after the close yesterday. IBM stock closed at $173.22, up +0.71 or +0.41 percent in Monday's regular trading session.

Armonk, New York based International Business Machines Corp. is the world's largest provider of computer services, with over 433,000 employees and operations spanning the globe.
The company's main business comes from the manufacture of computer hardware and software, infrastructure and hosting and consulting services for a variety of advanced technologies.

For the company's second quarter, non-GAAP diluted earnings from continuing operations came to $3.84 per share versus $4.43 per diluted share in the same period one year ago, down -13 percent year on year. Non-GAAP net income for the quarter came to $3.8 billion compared to $4.5 billion in 2014's second quarter, a decrease of -15 percent.

Revenue for the second quarter was $20.8 billion, -13 percent lower than the same period one year ago. Analysts expected the company to report earnings of $3.78 on revenue of $20.9 billion. IBM has reported lower revenue in the last 13 quarters.

Ginni Rometty, IBM President, Chairman and Chief Executive Officer stated in the company's press release that, "Our results for the first half of 2015 demonstrate that we continue to transform our business to higher value and return value to shareholders. We expanded margins, continued to innovate across our portfolio and delivered strong growth in our strategic imperatives of cloud, analytics and engagement, which are becoming a significant part of our business".

The strategic imperatives mentioned by CEO Rometty include analytics and cloud subscriptions, which grew at a pace of +30 percent adjusting for currencies and over +20 percent as reported, while cloud growth reached +70 percent adjusted for currencies and +50 percent as reported including the divested System x business.

Cloud revenue over the last 12 months came to +$8.7 billion, adjusted for the divested System x business. Revenue from business analytics rose more than +10 percent as reported and +20 percent adjusting for currency. Social revenues increased +30 percent or +40 percent adjusted for currency, while revenue from mobile quadrupled, both numbers on a year to date basis.

Revenue for software declined by -10 percent in the quarter and -3 percent adjusted for currencies. Hardware revenue also declined, with systems hardware off -32 percent versus last year's second quarter, including the $2.1 billion sale of IBM's System x hardware business to Lenovo in September. Nevertheless, the exception in hardware sales was the company's new z Systems mainframes, which increased by +9 percent and made up +24 percent of deliveries.

IBM stock initial rose after the earnings release, but subsequently sold off in yesterday's afterhours session. Despite the company's efforts to increase its cloud presence, the decrease in IBM's main business is taking a toll on the company as the market shifts.

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Published on Jul 21, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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