NEW YORK - IBM’s first-quarter earnings fell and revenue came in below Wall Street’s expectations as amid ongoing decline in its hardware business, one that was exasperated by weaker demand in China and emerging markets.
IBM Corp. said Wednesday that it earned $2.38 billion, or $2.29 per share, in the January-March period. That’s down 21 percent from $3.03 billion, or $2.70 per share, a year earlier. Excluding an $870 million charge for reorganizing its workforce and other one-time items, IBM’s earnings were $2.54 per share in the latest quarter, matching analysts’ expectations.
Chief Financial Officer Martin Schroeter forecast a “very weak” first quarter in January, and IBM delivered. Now the company has to make up more ground to end the year with an increase in profit.
Revenue fell 4 percent to $22.5 billion, below the $22.9 billion that analysts polled by FactSet had expected. It’s the eighth-consecutive quarter of revenue decline. The biggest drop was in its systems and technology unit, or hardware, where revenue tumbled 23 percent to $2.39 billion from $3.11 billion.
“Hardware was a lot worse than I thought,” said Daniel Morgan, a Synovus Trust portfolio manager who focuses on technology. He was expecting a 12 percent decline and said IBM is “really getting hurt” by the slowdown in China and emerging markets.
Software, on the other hand, performed better than he had expected. IBM said revenue in this segment grew 2 percent to $5.66 billion from $5.57 billion. Morgan said he had expected a small decline of less than 1 percent.
IBM laid off an undisclosed number of workers in the past year, though it has also made hires in other areas. It ended 2013 with 431,212 employees, down less than 1 percent from the end of 2012.
For the full year, IBM still expects adjusted earnings of at least $18 per share. That’s higher than estimates of $17.88.
Shares of Armonk, N.Y.-based IBM dropped more than 4 percent in extended trading after the results came out. The stock had closed at $196.40.
“For the stock to move meaningfully higher from the current valuation, we think IBM will need to demonstrate the company can grow revenues, not [earnings per share],” Keith Bachman, an analyst at BMO Capital Markets Corp., said in a note to investors before the earnings report.
Information for this article was contributed by Alex Barinka of Bloomberg News.
Business, Pages 24 on 04/17/2014