For the first time in 5 quarters, International Business Machines Corp has posted a bigger-than-expected decline in revenue due to weak demand. The news has sparked of fears that the tech behemoth could yet take quite om time to turnaround. What’s more, IBM’s revenue has been setting all sorts of unsavory records as well. For instance, the company’s revenue has fallen for 20 quarters in a row now. Phew!
Indeed, the stock has continued its downward trajectory and at the current rate, appeared to be on track to erase the 2.5 percent gains the company had made over the course of the year.
IBM is at a very critical juncture at present. The company’s core business, which involves hardware and software, is slowing down and the revenues being generated from the same are decreasing significantly. As such IBM has been diversifying of late and is moving into technology services and cloud platforms business. But, but, such efforts take some time before yielding fruit and have s far been unable to compensate the issues being caused in association with IBM’s core offering.
This along with the fact that the company failed to close several important financial transactions meant that profits dropped by 2.8 percent in the first quarter, as compared to 1.3 percent in the fourth quarter. It also managed to significantly exceed analysts’ expectation of a 1.6 percent drop. In financial terms, it translates into around .23 billion worth of cash.
Speaking on the topic, Edward Jones analyst Bill Kreher said:
I think the frustration lies with the overall miss on revenue. The Street has given IBM some credit over the last year that the transition is taking shape, so I think that’s where the risk lies … execution needs to be strong.
The company also said that the total gross profit margin fell in all five of its reporting units. Overall the adjusted gross margin of 44.5 percent managed to miss analysts’ estimates of 47.7 percent.
However, the revenue growth from the new-age, strategic imperatives showed an increase and accelerated to 12 percent in the first quarter from 11 percent in the fourth. This was perhaps the only bright light in an otherwise dismal show. Revenue from strategic imperatives totaled at somewhere around $7.8 billion in the latest quarter, accounting for 42 percent of total revenue. This was up from 37 percent around a year earlier.