--IBM declines comment on server sale report
--Company expects more job cuts than usual this quarter
--Management affirms full-year target
International Business Machines Corp. ( [Dear Guest/Member you can't see link before click here to register] ) said it expects to ramp up job cuts this quarter after sales of some software and mainframe computer fell short of expectations.
The Armonk, N.Y., company said it will reduce its work force in some areas more quickly this quarter to meet its per- share earnings target for this year of $16.70.
Chief Financial Officer Mark Loughridge didn't disclose the number of layoffs, saying management hadn't yet approved final plans but expects to report close to $1 billion of accounting charges this year to trim its work force--more than last year--with heavier reductions planned for the coming months.
Shares were 4.9% lower at $196.95 after hours as the company's earnings and revenue missed analysts' expectations, a rare event for a company that usually grows its core Profit even when sales lag. Thursday was the first time that IBM failed to beat per-share earnings estimates since October 2009, according to FactSet Research.
"The stressors are finally starting to appear on the model," ISI Group analyst Brian Marshall said. "Investors have been pretty used to the fact that they deliver double-digit earnings growth. Well, for the first time in a long time, they didn't do that." IBM said its earnings, excluding certain exceptional costs, rose a relatively slow 3.4%.
Separately, IBM is in advanced discussions with Lenovo Group Ltd. (LNVGY) to sell part of its computer server business, The Wall Street Journal reported, citing people familiar with the matter. At issue is IBM's business of selling so-called x86 servers, the low-priced workhorses of many corporate and cloud-based data centers.
An exact sale price is not known, WSJ reported, but one of the people said the deal could be worth billions of dollars. Mr. Loughridge declined to comment on the report.
IBM's results are often read as an indicator of the health of tech spending among government and corporate customers. The company is known for aggressively shedding less profitable businesses and cutting costs while bulking up its catalog of more unique offerings--such as consulting services, analytics software and data-storage systems--where it can earn wider margins.
The latest results continued a trend of worrisome results from many tech heavyweights, which have contended with disruptive changes in the kind of software and computers favored by corporate customers, along with unpredictable goverment spending. Business software provider Oracle Corp. (ORCL) also surprised observers last month with weaker-than- expected software sales that caused its quarterly earnings to stall, another unexpected hiccup for investors used to more predictable Profit growth.
For IBM, revenue last quarter in the Americas--its largest market--fell about 4%. At the same time, sales in IBM's growth markets, which include Brazil, Russia, India and China, slipped 1%.
Mr. Loughridge said belt-tightening in the Chinese corporate sector caught IBM's management a bit off guard, though he suggested much of the blame lay with sales teams failing to close deals before the quarter ended. IBM said much of that business will show up when the company reports its next results.
Mr. Loughridge said charges tied to work force rebalancing will lead to stronger earnings growth in the second half, with earnings returning to double-digit growth on a per-share basis by the fourth quarter.
Overall, IBM reported a Profit of $3.03 billion, or $2.70 a share, down from $3.07 billion, or $2.61 a share, a year earlier. Operating earnings, which exclude retirement-plan costs and amortization, rose to $3 a share from $2.78.
Revenue fell 5.1% to $23.41 billion, or 3% when adjusted for currency fluctuations, marking the company's fourth straight quarter of top-line contraction.
Analysts most recently predicted earnings of $3.05 a share and revenue of $24.62 billion.
Gross margin widened to 45.6% from 45.1%.
Revenue in IBM's systems-and-technology unit, which includes its hardware business, fell 17%, its sixth straight quarter of declining sales performance. Excluding the effect of a retail hardware business IBM sold to Toshiba Corp. (6502.TO) last year, sales fell 14%--a result that still disappointed management.
Mr. Loughridge said several profitable mainframe deals "fell short of the goal line" last quarter.
"For systems and technology, this was not the quarter we expected," he said during a conference call with analysts.
Software revenue eased 0.5%, also hurt by the absence of some highly profitable deals last quarter. Technology services revenue decreased 4.3%, while business services revenue fell 3.3%.
--Company expects more job cuts than usual this quarter
--Management affirms full-year target
International Business Machines Corp. ( [Dear Guest/Member you can't see link before click here to register] ) said it expects to ramp up job cuts this quarter after sales of some software and mainframe computer fell short of expectations.
The Armonk, N.Y., company said it will reduce its work force in some areas more quickly this quarter to meet its per- share earnings target for this year of $16.70.
Chief Financial Officer Mark Loughridge didn't disclose the number of layoffs, saying management hadn't yet approved final plans but expects to report close to $1 billion of accounting charges this year to trim its work force--more than last year--with heavier reductions planned for the coming months.
Shares were 4.9% lower at $196.95 after hours as the company's earnings and revenue missed analysts' expectations, a rare event for a company that usually grows its core Profit even when sales lag. Thursday was the first time that IBM failed to beat per-share earnings estimates since October 2009, according to FactSet Research.
"The stressors are finally starting to appear on the model," ISI Group analyst Brian Marshall said. "Investors have been pretty used to the fact that they deliver double-digit earnings growth. Well, for the first time in a long time, they didn't do that." IBM said its earnings, excluding certain exceptional costs, rose a relatively slow 3.4%.
Separately, IBM is in advanced discussions with Lenovo Group Ltd. (LNVGY) to sell part of its computer server business, The Wall Street Journal reported, citing people familiar with the matter. At issue is IBM's business of selling so-called x86 servers, the low-priced workhorses of many corporate and cloud-based data centers.
An exact sale price is not known, WSJ reported, but one of the people said the deal could be worth billions of dollars. Mr. Loughridge declined to comment on the report.
IBM's results are often read as an indicator of the health of tech spending among government and corporate customers. The company is known for aggressively shedding less profitable businesses and cutting costs while bulking up its catalog of more unique offerings--such as consulting services, analytics software and data-storage systems--where it can earn wider margins.
The latest results continued a trend of worrisome results from many tech heavyweights, which have contended with disruptive changes in the kind of software and computers favored by corporate customers, along with unpredictable goverment spending. Business software provider Oracle Corp. (ORCL) also surprised observers last month with weaker-than- expected software sales that caused its quarterly earnings to stall, another unexpected hiccup for investors used to more predictable Profit growth.
For IBM, revenue last quarter in the Americas--its largest market--fell about 4%. At the same time, sales in IBM's growth markets, which include Brazil, Russia, India and China, slipped 1%.
Mr. Loughridge said belt-tightening in the Chinese corporate sector caught IBM's management a bit off guard, though he suggested much of the blame lay with sales teams failing to close deals before the quarter ended. IBM said much of that business will show up when the company reports its next results.
Mr. Loughridge said charges tied to work force rebalancing will lead to stronger earnings growth in the second half, with earnings returning to double-digit growth on a per-share basis by the fourth quarter.
Overall, IBM reported a Profit of $3.03 billion, or $2.70 a share, down from $3.07 billion, or $2.61 a share, a year earlier. Operating earnings, which exclude retirement-plan costs and amortization, rose to $3 a share from $2.78.
Revenue fell 5.1% to $23.41 billion, or 3% when adjusted for currency fluctuations, marking the company's fourth straight quarter of top-line contraction.
Analysts most recently predicted earnings of $3.05 a share and revenue of $24.62 billion.
Gross margin widened to 45.6% from 45.1%.
Revenue in IBM's systems-and-technology unit, which includes its hardware business, fell 17%, its sixth straight quarter of declining sales performance. Excluding the effect of a retail hardware business IBM sold to Toshiba Corp. (6502.TO) last year, sales fell 14%--a result that still disappointed management.
Mr. Loughridge said several profitable mainframe deals "fell short of the goal line" last quarter.
"For systems and technology, this was not the quarter we expected," he said during a conference call with analysts.
Software revenue eased 0.5%, also hurt by the absence of some highly profitable deals last quarter. Technology services revenue decreased 4.3%, while business services revenue fell 3.3%.