IBM earnings slump as company shifts to cloud, mobile and analytics

Areas such as cloud services and mobile aren't growing fast enough to make up for declines in other areas

IBM is hitting a rough patch financially as it shifts its strategy from hardware to cloud, mobile and analytics technology.

The company, considered a technology bellwether for the scope of its product portfolio and geographical breadth, reported Monday that profit and revenue declined in the third quarter.

"We are disappointed in our performance. We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry," CEO Ginni Rometty said in a statement.

IBM results indicate that the company is finding it tough to keep up with the change. Third-quarter net income was US$3.5 billion compared with $4.1 billion in the third quarter of 2013, a decrease of 17 percent. Revenue was down 4 percent year-on-year to $22.4 billion.

On a slightly more upbeat note, what IBM calls strategic growth areas -- including cloud, data and analytics, security, social and mobile -- performed well, the company said. The company did not break out numbers for all of these sectors, however. Like other tech vendors, IBM wants to shift its business to these areas. However, for the moment they aren't growing fast enough for the company to make up for shortfalls in other sectors.

The results are from continuing operations and exclude the discontinued microelectronics business, which chip manufacturer GlobalFoundries is taking over in a deal that was also announced on Monday. IBM is paying chipset manufacturer about US$1.3 billion to take two factories off its hands in a move to cut costs.

The loss from discontinued operations in the third quarter includes a pre-tax charge of $4.7 billion, IBM said.

IBM earlier this month closed a deal to sell its x86 server business to Lenovo for $2.1 billion.

Company shares dropped 7 percent to $169.30 in pre-market trading.

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Tags business issuesIBMfinancial results

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Mikael Ricknäs

IDG News Service
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