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IBM posts its lowest quarterly revenue in five years
By Finfacts Team
Apr 17, 2014 - 8:53 AM
|IBM Ireland's technology campus in West Dublin.|
IBM on Wednesday posted its lowest quarterly
revenue in five years, as first quarter revenue fell 4% to $22.5bn, with the
company's hardware, software and services business all underperforming. It was
also the eighth straight quarter the company failed to show a revenue rise.
First-quarter net income was $2.4bn, down 21%
year-to-year. Operating net income was $2.6bn compared with $3.4bn in the first
quarter of 2013, a decrease of 22%. The results include the impact of a charge
of approximately $870m for "workforce rebalancing" and a gain of nearly $100m
for the divestiture of the customer care outsourcing business, consistent with
the company’s full-year guidance in January 2014.
Total revenues for the first quarter of 2014 of
$22.5bn were down 4% (down 2%, adjusting for currency; down 1%, excluding the
customer care outsourcing business) from the first quarter of 2013.
“In the first quarter, we continued to take
actions to transform parts of the business and to shift aggressively to our
strategic growth areas including cloud, big data analytics, social, mobile and
security,” said Ginni Rometty, IBM chairman, president
and chief executive officer. “As we move through 2014, we will begin
to see the benefits from these actions. Over the long term, they will position
us to drive growth and higher value for our clients.”
The shares fell 4% in after-hours trading
to $188.20. The stock is up about 2% since Rometty became CEO in January, 2012.
The Wall Street Journal reports that since 2000,
IBM has divested $16bn in revenue, while more than doubling its pretax income.
Big companies like Clorox Co. are increasingly ditching hardware sold by IBM and
others and instead renting out computing power over the Internet. Ralph Loura,
Clorox's chief information officer, said it used an IBM mainframe computer for
four years but retired it around two years ago and is now mostly renting
computer power to run many of the company's productivity applications. Going
forward, he said the company doesn't expect to buy more computer servers or
storage gear. "Our intent is to leverage the cloud,"
The Journal says software is IBM's only major business that has been growing but
revenue only rose 1.6% to $5.66bn. Morgan Stanley estimated the software
business's revenue would grow 3%. One problem was that growth areas such as
analytics software cooled. Last year, business analytics revenue rose 9%, but in
the first quarter the growth was 5%.
Revenue in IBM's services division, its largest business segment, fell 2%, worse
than Sanford Bernstein's estimate of a 1% drop, largely due to the customer-care
sale and continuing weakness in emerging markets.
IBM said its cloud revenue grew more than 50% this quarter, but it didn't
disclose the actual dollar amount of the business. It did say that cloud
technology delivered as a service was on track to reach $2.3bn for the year.
IBM's total revenue last year was around $100bn.
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