International Business Machines (IBM) Shares Lower on Revenue Miss
Shares of International Business Machines Corp. (IBM) were trading down -6.92 or -4.64 percent to $142.30 per share in this morning’s premarket after the company announced earnings late yesterday that beat analyst expectations but missed on revenue. IBM stock closed at $149.22 per share, down -1.17 or -0.78 percent in Monday’s regular trading session.
Armonk, New York based International Business Machines Corp. was founded as the Computing Tabulating Recording Company in 1911 and is the world’s largest provider of computer services.
For the company’s fiscal third quarter, IBM reported earnings of $3.34 per share on revenue of $19.28 billion. The analyst consensus was for the company to report earnings of $3.30 per share on revenue of $19.68 billion.
The revenue miss was the fourteenth consecutive quarter that the company has missed analyst forecasts and the lowest level for revenue the company has seen since 2002. In addition, IBM’s net income from continuing operations declined 14 percent to $3 billion.
In an interview with CNBC after the earnings release, IBM Chief Financial Officer Martin Schroeter said that, “A few things to note...within the revenue we report we have a pretty substantial currency headwind we continue to deal with and as we transform our business we continue to move out of areas where we don't see long term value, so across our revenue base that's about 13 points of impact so excluding those two in the third quarter we reported a down about 1 percent revenue”.
As IBM revenues continue to fall, the company is still transitioning from an IT infrastructure and data storage focus to other endeavors such as developing its Watson cognitive technology and its presence in the cloud. Under Ginni Rometty, who took over the Chief Executive position four years ago, the company has invested over $10 billion in acquisitions, capital expenditure and R&D. CFO Schroeter stated that, “We’ve always said our transformation would take time”.
IBM’s cloud service, where some of the company’s operations at its data centers are hosted, grew to a $4.5 billion annual run rate compared to $3.1 billion in the same period one year ago. Despite revenue declines in the United States, China and the BRICS nations, the Japanese and German markets were the strongest in the company’s portfolio.
Also pressuring the stock this morning was IBM’s downwardly revised guidance. The company now expects to earn $14.75 to $15.75 in adjusted per share earnings for the full 2015 year, compared to a previous forecast of $15.75 to $16.50. IBM stock is selling off and could test its yearly low of $140.56 in the near term.
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