IBM Earnings Fall in Prolonged Sales Slump -- Update
17 Octobre 2019 - 12:25AM
Dow Jones News
By Asa Fitch
International Business Machines Corp. reported a fifth
sequential quarter of falling sales, with the company's legacy
information-technology business holding back Chief Executive Ginni
Rometty's efforts to revive growth through the $34 billion
acquisition of software giant Red Hat.
IBM on Wednesday reported sales of $18.03 billion, below
analysts expectations and trailing the $18.76 billion it posted in
the year-prior period. Shares slumped 6% in after-hours
trading.
The revenue decline was IBM's 27th overall under Ms. Rometty,
who has struggled to adapt the more than century-old company to a
changing global IT landscape since taking the reins in 2012.
The company's closely watched adjusted earnings per share fell
to $2.68, but came in slightly higher than analysts' forecasts of
$2.66.
Ms. Rometty, for years, has been trying to reinvent IBM, with
bets on areas such as health-care technology and artificial
intelligence. Cloud computing, a model where customers rent
computing power instead of buying their own machines, is another
cornerstone of Ms. Rometty's bid to revive IBM's fortunes.
While Big Blue was an early pioneer of cloud-computing services,
it fell behind rivals such as Amazon.com Inc. and Microsoft Corp.
IBM is the fifth largest cloud-computing company by sales,
according to research firm Gartner Inc., with a 1.8% market share
last year. The Red Hat deal that closed this year aims to propel
IBM to a top player in the cloud.
Revenue in the company's cloud businesses rose 11% in the third
quarter to $5.0 billion, IBM said. "Our results demonstrate that
clients see IBM and Red Hat as a powerful combination," Ms. Rometty
said.
IBM's cloud growth rate still trails the increases Amazon and
Microsoft have been reporting.
The company said Red Hat's revenue increased 19% in last
quarter, the first since the deal's close. But accounting rules
limited the portion of those sales IBM was able to include in its
quarterly results. IBM reported all of Red Hat's expenses, which
hurt profit.
With Red Hat, IBM hopes to gain a dominant role in what it terms
"the hybrid cloud." The company is betting that many business
haven't yet migrated their data to the cloud and that many will
choose a so called hybrid model, which IBM has focused on, where
data storage relies on a mix of in-house and rented computers. Red
Hat sells support and training for software that aims to work
seamlessly in the cloud and on-site, which IBM sees as a critical
in a hybrid-cloud world.
As IBM pushes ahead with its cloud focus, the company has been
trying to reorient its traditional technology-services division by
shedding lower-margin parts of that business. That has led to lower
sales. Revenue in that segment, which sells outsourced IT to
companies, fell 5.7% in the third quarter to $6.70bÍillion, leading
to the overall sales retreat.
IBM's revenue from selling mainframes -- huge computers that
process transactions and manage company data and a traditional
earnings mainstay for the company -- also fell in the quarter.
Sales of mainframes rose after IBM introduced its newest generation
of them in 2017, but have trailed off in recent quarters. The
company in September unveiled a new version of its mainframes, but
they aren't expected to affect financial results in a significant
way until the current quarter.
Write to Asa Fitch at asa.fitch@wsj.com
(END) Dow Jones Newswires
October 16, 2019 18:10 ET (22:10 GMT)
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