Home
Apps
Apps News
IBM Reports Weaker Than Expected Software Sales in Second Quarter

IBM Reports Weaker-Than-Expected Software Sales in Second Quarter

By Reuters | Updated: 18 July 2014 19:21 IST

International Business Machines Corp's software business grew less than expected in the second quarter, sparking a selloff in the company's stock on Thursday, even as its revenue beat forecasts.

The company's software business revenue grew 1 percent in the quarter to $6.5 billion, slower than forecasts of 3 percent, as it signed fewer contracts than expected.

"We expect acceleration of software revenue to mid-single digits in second half of 2014," IBM Chief Financial Officer Martin Schroeter said on a conference call after the results were released.

IBM, the world's largest technology company, has been attempting to restructure its business to focus on high-end products like Cloud, mobile security and Big Data. The company estimates that software will bring in half of its profits by 2015.

"This just isn't a growth story anymore, it hasn't been for a little while," said Scott Kessler an analyst at S&P Capital.

(Also see: Apple-IBM Enterprise Mobility Deal Weighs on BlackBerry Shares)

"Software is a big business no question, but 1 percent growth in what many have thought of as their key growth driver is worrisome," he said.

IBM shares slid 1.9 percent in after-hours trading to $188.89 after closing at $192.49.

In January, IBM sold its customer care business, which brought in approximately $1.2 billion in full year revenue in 2013, to hardware distributor Synnex Corp, a sale the company expects to negatively affect revenue comparisons by $300 million per quarter.

Last quarter, the company saw a $870 million restructuring fee, which was largely completed and contributed to savings quarter over quarter.

IBM reported free cash flow of $3 billion and buybacks of $3.7 billion, down from $8.2 billion last quarter.

The company also saw growth in its strategic sectors as business analytics was up 7 percent, cloud revenue grew 50 percent, and security revenue rose 20 percent.

Revenue in the Americas fell 1 percent, while revenue dropped 9 percent in Asia Pacific.

(Also see: IBM to Invest $3 Billion in Chip Research Hoping for a Breakthrough)

Overall, revenue fell 2 percent to $24.4 billion in the second quarter, above analysts' average estimate of $24.1 billion.

Net profit rose to $4.1 billion, or $4.12 per share, from $3.2 billion, or $2.91 per share, a year earlier.

On an adjusted basis, the company earned $4.32 per share, beating analysts' average estimate of $4.29, according to Thomson Reuters I/B/E/S.

Hardware revenue fell 11 percent to $3.3 billion, the seventh double-digit decline in the past eight quarters.

Comments

For the latest tech news and reviews, follow Gadgets 360 on X, Facebook, WhatsApp, Threads and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel. If you want to know everything about top influencers, follow our in-house Who'sThat360 on Instagram and YouTube.