Innovation
IBM posts its lowest quarterly revenue in five years
By Finfacts Team
Apr 17, 2014 - 8:53 AM

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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," he said.

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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