Much like Oracle last month, IBM blamed a poor performance by its sales force for some of the shortfall. But analysts said it was not just one quarter - the company's sales have been weakening consistently, dragging down results with or without the changes in the yen.
"Their revenue has been declining for basically many quarters in a row. You can't have revenue declines and consistently expect your earnings to beat. That is catching up with them," said ISI Group analyst Brian Marshall.
IBM is known for keeping a tight rein on costs and focusing on high-margin software, allowing it to generally exceed Wall Street expectations, even in a tough economic environment.
But Chief Financial Officer Mark Loughridge blamed poor sales execution for the failed closing of a number of deals, as well as the Easter holiday at the end of March. Around $400 million worth of deals expected to close in the first quarter had been moved into the second, IBM said.
On a conference call with analysts, Loughridge also said it was unclear whether the sequester - a series of automatic U.S. federal budget cuts - had an effect.
"It's hard to measure. I can tell you that our U.S. federal business was down 13 percent, which was certainly a drag on the U.S. performance," he said.
Maintains target
The yen was at least something of an issue in the quarter as well. The deterioration in the Japanese currency since mid-January reduced earnings by 7 cents per share, a spokesman said.
Loughridge said IBM was "clearly not immune from changes in the global economy," noting the weak yen and the difficulty IBM has had in hedging that currency.
Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, said recently that nearly two dozen top U.S. companies - including IBM - derive 10 percent or more of their sales in Japan. He expects those companies to quickly see the impact of the weakening currency.
But analysts said the yen issue was not foremost for them among IBM's other problems.
"This is really a combination of several factors," Macquarie Research analyst Brad Zelnick said. "At the end of the day it's the environment and demand for the products (companies) have to offer. Execution is another word for 'we're facing some challenges here.'"
IBM's first quarter non-GAAP income rose 3 percent to $3.4 billion, or $3 per share, but missed analyst estimates of $3.05 a share, according to Thomson Reuters I/B/E/S. It was the first time it at least nine quarters that IBM missed estimates.
Quarterly revenue dropped 5 percent to $23.4 billion, compared with estimates of $24.6 billion. Revenues fell 3 percent adjusted for currency.
For the current quarter, IBM is anticipating a restructuring charge of almost $1 billion and EPS in a similar range to the first quarter. Analysts expected earnings of $3.95 per share in the second quarter.
However, Loughridge expected EPS to improve in the second half of the year, allowing IBM to reach its full year target of at least $16.70 per share.
IBM shares lost 3.4 percent from a closing price of $207.15 in extended trading following results.
Forrester Research's Andrew Bartels said the results showed IBM was somewhat impacted by the sequester, but that Microsoft's results showed tech spending was not generally down.
"What we're getting from these two results are somewhat different perspectives on how the macroeconomic environment is impacting tech spending," he added.
© Thomson Reuters 2013
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.