Apr 17, 2018
IBM shares dip as profit forecast falls short
Reuters
International Business Machines Corp's (IBM.N) full-year profit forecast fell short of Wall Street targets on Tuesday, sending the technology company's shares down as much as 6 per cent.
IBM said it continues to expect adjusted earnings per share of at least US$13.80, while analysts were expecting US$13.83.
"We delivered exactly what we said 90 days ago. The US$13.80 is an 'at least' and it's up 1 to 2 per cent year over year," IBM's CFO James Kavanaugh told Reuters in an interview.
However, analysts were not impressed by the quality of the earnings. "This is exactly what happened last quarter. But again the quality of earnings was not that great," Wedbush Securities analyst Moshe Katri said.
"It's not necessarily about topline growth, its about profitable growth."
Katri said IBM's legacy hardware business continues to hurt margins growth and its business, which the company calls strategic imperatives and includes the contribution of cloud computing, has slowed.
IBM has in recent years shifted focus to high-margin businesses — such as cloud, cybersecurity and data analytics — to counter a slowdown in its legacy businesses.
IBM's revenue grew 5 per cent to US$19.07 billion in the quarter with 65 per cent growth in sales from security services. Cloud revenue grew 25 per cent.
However, net profit fell to US$1.68 billion, or US$1.81 per share, in the first quarter ended March 31 from US$1.75 billion, or US$1.85 per share, a year earlier.
Excluding items, the company earned US$2.45 per share, beating the analyst average estimate of US$2.42, according to Thomson Reuters I/B/E/S.
"We feel very comfortable as we enter the second quarter and the remainder of the year that we can actually deliver moving forward," Kavanaugh said.
IBM shares, which has risen about 5 per cent this year, were down 5.6 per cent at US$151.85 in extended trading.