Earnings

IBM Sales Sink Again, for the Ninth-Straight Quarter


IBM (IBM) posted yet another quarter of falling revenue, its ninth in a row, as the 103-year-old technology company continues to struggle to adapt to the cloud era of computing. Shares fell 1.5 percent in after-market trading.

The company still managed to beat Wall Street’s expectations on its preferred financial measurement of adjusted earnings per share, as it usually does. Big Blue has sworn to hit an adjusted $20 per share annually by the end of next year, a plan officially known as Roadmap 2015 and which employees call Roadkill 2015. With falling sales, the imperative to keep delivering higher earnings has meant imposing deep cost cuts, racking up debt to pay for buybacks, selling business lines, cutting jobs, and devising tax-rate cleverness—all at a time when IBM should probably be throwing everything it has at the cloud.

That conundrum, the subject of a recent Bloomberg Businessweek cover story, has boxed in Chief Executive Ginni Rometty ever since she was tapped to take over the company in 2011. Rometty talks all the time about how urgently IBM needs to transform for the era of cloud, yet her hulking, 431,000-employee organization has been slow to respond. To meet their computing needs, corporate customers are spending less on IBM mainframes and servers and more on computing delivered cheaply and flexibly over the Internet by the likes of Amazon (AMZN). Falling demand for hardware is threatening IBM’s software business and the lucrative consulting work that often knits everything together.

IBM surprised the business world with a new partnership with Apple, (AAPL) of all companies, earlier this week. IBM will develop more than 100 mobile applications for various industries, the companies said, that will run on iPhones and iPads that IBM will sell to its enterprise customers.

IBM reported revenue for the past quarter of $24.4 billion, down 2 percent—better than the 3.2 percent decline Wall Street had been expecting, according to Bloomberg data. The company said cloud revenue increased more than 50 percent since the start of the year, reaching an annual rate of $2.8 billion. That’s a fraction of the company’s roughly $100 billion annual revenue.

Summers_190
Nick Summers covers Wall Street and finance for Bloomberg Businessweek. Twitter: @nicksummers.

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Companies Mentioned

  • IBM
    (International Business Machines Corp)
    • $194.0 USD
    • 0.25
    • 0.13%
  • AMZN
    (Amazon.com Inc)
    • $331.32 USD
    • 6.32
    • 1.91%
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