Business / Gadgets

IBM misses revenue targets again after stumbling in China

(Agencies) Updated: 2014-01-22 15:36

"Their growth markets were everything but growth," Forrester analyst Andrew Bartels said. "They have had quite a bit of success with sales of hardware in these emerging markets, but these markets are not doing well. They're facing competition in those markets."

IBM forecast that full-year 2014 adjusted profit would beat analysts' expectations and also affirmed its 2015 target for operating earnings of at least $20 per share. Some analysts said they thought IBM would need to grow non-hardware revenue substantially to hit that mark.

Edward Jones analyst Josh Olson told Reuters the company would need solid performance in software and services to meet its target, since expectations are that hardware will not contribute to profit in 2014.

"Assuming a normalized tax rate, this doesn't leave a lot of room for error to meet the $18 EPS target," he said.

Revenue falls

Total revenue fell 5 percent to $27.7 billion in the fourth quarter ended December 31, missing analysts expectation of $28.25 billion, according to Thomson Reuters I/B/E/S.

"In view of the company's overall full-year results, my senior team and I have recommended that we forgo our personal annual incentive payments for 2013," CEO Rometty said in a statement. For 2013, her base pay was $1.5 million and annual incentive payment target was $4 million.

Revenue from IBM's system and technology unit, which includes servers and storage, fell 26.1 percent to $4.26 billion. Revenue from global technology services, its largest business, fell 3.6 percent to $9.92 billion.

Software revenue was the only bright spot. It grew 2.8 percent to $8.14 billion in the quarter.

IBM and rivals such as Oracle and SAP are racing to meet surging demand for web-based software products, better known as cloud computing.

Moving to the cloud allows businesses to cut costs by ditching bulky servers for network-based software and using remote data centers run by technology companies instead.

The global cloud services market last year grew by almost a fifth to an estimated $131 billion, according to research firm Gartner. IBM Markets Intelligence estimates the market could be as big as $200 billion by 2020.

Net income for the fourth quarter rose to $6.2 billion, or $5.73 a share, from $5.8 billion, or $5.13 per share a year earlier. It got help though from a lower tax rate of 11.2 percent in the fourth quarter, down 14.3 points from a year ago.

On an adjusted basis, it earned $6.13 per share, above analysts' estimates of $5.99 per share.

Before its after-hours decline, the stock closed at $188.43 on Tuesday on the New York Stock Exchange. It has gained about 2 percent since it reported third-quarter results in October.

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