International Business Machines Corp. reported a 12% decrease in
revenue--the company's 12th straight quarter of year-over-year
declines--hurt by the stronger U.S. dollar and weakness in its
hardware business.
For the year, the company reiterated its estimate for per-share
profit, excluding certain items, between $15.75 and $16.50.
Shares rose 0.4% to $166.87 in recent after-hours trading as the
company's first-quarter per-share earnings exceeded
expectations.
IBM is the middle of a corporation reinvention similar that is
starting to feel a lot like its early 90s transition to a software
and services company. The company is shedding unprofitable hardware
businesses, as it pursues higher-margin fare in the realms of big
data, security, cloud computing, and software and services for
mobile devices.
Last year these initiatives accounted for $25 billion, or 27% of
annual revenue. IBM hopes they will grow to $40 billion, or 40% of
revenue by 2018.
The computing pioneer, originally known for big mainframe
systems announced deals last year to sell its commodity server
business--System X business--to Lenovo Group Ltd. and pay
Globalfoundries Inc. to take over IBM's semiconductor manufacturing
business.
The company expects its hardware business to improve this year
as it refreshes its mainframe and Unix computer systems, but IBM is
facing a new generation of cloud computing competitors. Analysts
expect it to continue to struggle this year in services and
software, said UBS analyst Steven Milunovich in an interview last
week.
"Investors and users both see them on the wrong side of the
fence when it comes to disruption," Mr. Milunovich said.
Big Blue also has been pushing sales of its Watson software.
IBM's Watson data-mining technology has delivered high-profile
results, famously winning at Jeopardy in 2011, but the path to
revenue has been slow.
IBM has unveiled several Watson-based efforts in recent months,
most recently a partnership with Apple Inc., Johnson & Johnson
and Medtronic Inc., to gather and analyze a flood of health-related
personal information. Known as Watson Health, the alliance
transfers IBM's experience in data processing to the health-care
field, part of an evolving strategy to pool and analyze data from
other companies, such as Twitter Inc. and the Weather Channel.
Overall, IBM reported a profit of $2.33 billion, or $2.35 a
share, up from $2.38 billion, or $2.29 a share, a year earlier.
Excluding certain costs and discontinued operations, IBM's
per-share earnings rose to $2.91 from $2.68.
Revenue decreased to $19.59 billion from $22.24 billion.
Excluding currency impacts and divested businesses, revenue was
flat from a year ago.
Analysts polled by Thomson Reuters expected per-share profit of
$2.80 and revenue of $19.64 billion.
As of February, IBM expected currency to hurt revenue growth by
more than 7 percentage points, above the hit of 6 to 7 points it
projected in January. For the full year, IBM is expecting a
foreign-exchange impact of more than 6 points, above previous
projections for an impact of 5 to 6 points.
Write to Tess Stynes at tess.stynes@wsj.com and Robert McMillan
at robert.mcmillan@wsj.com
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