IBM's Revenue Falls Again -- 2nd Update
16 Abril 2019 - 8:10PM
Noticias Dow Jones
By Asa Fitch
International Business Machines Corp. reported a third
consecutive quarter of declining revenue, further clouding Chief
Executive Ginni Rometty's yearslong quest to revitalize the
computing giant.
Under Ms. Rometty, who has been at the helm since 2012, IBM has
poured resources into its cloud-computing business and new
technologies such as artificial intelligence, aiming to reorient
Big Blue in a world where traditional growth engines like equipment
sales and services haven't been growing as rapidly.
IBM said its cloud businesses grew by 10% in the past 12
months.
For a brief spell last year, it appeared as though IBM had
turned a corner, reporting successive quarters of overall revenue
growth -- however small.
That changed in the middle of 2018, as Wall Street analysts and
investors watched revenue tip back under.
IBM shares fell 2.7% to $141.21 in extended trading after
closing Tuesday less than 1% higher.
Several of IBM's lines of business, including cloud services and
information-technology-support services declined.
IBM also had faced a tough comparison to last year's first
quarter, when a new generation of industrial-strength mainframe
computers helped drive sales. That segment dropped 11% in the
latest quarter.
In a conference call with analysts Tuesday, IBM Chief Financial
Officer James Kavanaugh blamed the most-recent revenue decline in
part on clients in the Asia-Pacific region delaying buying
decisions.
"The team's on the field, and we're focused on closing" those
transactions, Mr. Kavanaugh said, also affirming the company's
annual guidance.
Net income fell 5.2% to $1.59 billion. Adjusted profit, which
excludes some items such as acquisition costs, came to $2.25 a
share. Analysts had expected $2.22.
Despite the drop in net profit and revenue, IBM touted the
growth in its cloud-computing revenue, which reached $19.5 billion
for the past 12 months. Mr. Kavanaugh also pointed to IBM's
expanding margins as the company pursues faster-growing businesses
that cost less to run.
While growth was flat or declined in all of IBM's main reported
lines of business, the company bumped up its overall profit margin
by a percentage point to 44.2%.
Asked if job cuts were planned as IBM struggles to ramp up
business, Mr. Kavanaugh said the company would "take actions to
address the stranded costs and structures" that would eat the
majority of a projected $500 million to $700 million gain from
planned divestitures.
IBM, Mr. Kavanaugh said, expects to close most -- if not all --
planned divestitures in the second quarter.
Once an icon of American ingenuity, IBM has struggled to compete
in the modern computing era as the rise of cloud giants like
Amazon.com Inc. and Alphabet Inc.'s Google have challenged an old
model where big companies handled their critical computing needs
largely in-house. IBM sees promise in the so-called hybrid cloud --
the idea that companies will increasingly use a combination of
cloud services and their own equipment to accomplish those tasks --
and aims to grow that business.
IBM's cloud segment may not be growing as fast as some of
Amazon's or Microsoft's cloud services, Mr. Kavanaugh said, but the
company is keeping pace with its target for midteen growth in the
hybrid cloud, a rate he said can allow it to take share in that
arena.
Ms. Rometty is aiming to bolster IBM's hybrid-cloud strategy
through IBM's acquisition of Red Hat Inc., an open-source software
and services company that helps businesses streamline their
computing strategies as they grow. That deal, valued at around $33
billion, is IBM's largest-ever acquisition and is expected to close
in the second half of the year. IBM intends to suspend its share
repurchases in 2020 and 2021 to pay down debt.
IBM's revenue had fallen virtually every quarter since Ms.
Rometty took over, up until the last quarter of 2017, when it
suddenly rose again. The company saw further revenue rises in the
first half of last year, but that turnaround proved short-lived:
Revenue declined again in the last two quarters of 2018.
--Maria Armental contributed to this article.
Write to Asa Fitch at asa.fitch@wsj.com
(END) Dow Jones Newswires
April 16, 2019 20:55 ET (00:55 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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