IBM Results Decline Again But Top Expectations -- Update
July 18 2016 - 5:03PM
Dow Jones News
By Rachael King
Even as International Business Machines Corp. makes some gains
in new strategic areas such as cloud computing and artificial
intelligence, its total sales continue to decline.
The Armonk, N.Y., company reported Monday that its revenue for
the second quarter dropped 2.8% to $20.24 billion, as its products
have become increasingly under threat by the move to computing
services delivered over the internet. The company has now posted
revenue declines for 17 straight quarters.
The metric was still slightly better than analysts' call for
$20.03 billion, according to Thomson Reuters. And IBM shares
climbed 2.6% to $164 after hours as its bottom line also beat
expectations.
The computing giant said earnings fell to $2.5 billion, or $2.61
a share, from $3.45 billion, or $3.50 a share, a year earlier.
Excluding charges, they totaled $2.95, topping the $2.89 expected
by analysts.
During the second quarter, IBM signed cloud agreements with
companies such as Pratt & Whitney, Halliburton Co. and Kaiser
Permanente. The company said its revenue from cloud services
increased 30% for the quarter and was $11.6 billion over the past
12 months. Its cloud services include SoftLayer for renting
hardware capacity over the Internet and its Bluemix services which,
among other capabilities, let companies rent software that can be
accessed through a Web browser.
The company is also starting to see new revenue from the
billions of dollars in acquisitions it has made. This year, IBM has
closed acquisitions with 11 companies in areas such as data
analytics, cloud and security. Those deals include Weather Co.,
video cloud services firm Ustream Inc. and Truven Health Analytics
Inc.
While sales may be growing in pockets, some analysts said they
won't be convinced that the reinvention is working until they see
revenue growth across the board.
"Despite the fact that revenue for these strategic imperatives
over the past 4-5 years have really been growing well, and have
been becoming a bigger part of the mix, the growth rate of the
company in terms of revenue has actually been flat to down," said
Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co.,
ahead of the report.
IBM's path to new businesses such as cloud, artificial
intelligence, data analytics, mobile, social and security has been
challenging. As overall revenue shrinks faster than the new
businesses grow, the company has laid off tens of thousands of
employees over the past year, even as it has hired thousands of new
employees in these new businesses. IBM calls these new businesses
"strategic imperatives," and said revenue from these businesses
grew 12% to $8.3 billion for the quarter. Over the past 12 months,
the businesses logged revenue of $30.7 billion, making up 38% of
the top line.
The company reaffirmed its guidance for earnings, excluding
items, of about $13.50 for the year.
IBM shares have dropped by 17% since Ms. Rometty took over in
January 2012; the S&P 500 index is up 70% during the same
period.
Write to Rachael King at rachael.king@wsj.com
(END) Dow Jones Newswires
July 18, 2016 16:48 ET (20:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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