Tuesday, April 16, 2024

IBM Hit by Rare Decline in Sales in its Software Units

On Thursday, IBM missed Wall Street quarterly revenue estimates, hit by a rare decline in sales in its software unit as consumers shied away from longer-term deals because of pandemic-induced economic uncertainty.

The 109-year-old company is planning to break into two public corporations and the namesake company will concentrate on the so-called hybrid cloud, where businesses use a mix of their own datacenters and leased data storage and processing services.

In the fourth quarter, revenue from its cloud computing business grew 10 percent to a record $7.5 billion (approximately Rs. 54,750 crores), with IBM saying it is optimistic of returning to sales growth in 2021 and expected revenue after the split to rise in mid-single digits.

However, it was not enough to persuade investors, as the company’s stock fell 6.7 percent in extended trading to $122.98 (approximately Rs. 9,000) after IBM’s fourth consecutive quarter of sales decline.

“This puts additional pressure on larger software transactions this quarter and project delays in some services engagements.”

Cloud and cognitive revenues, which house the software products of IBM and its largest unit, decreased after two years of growth by 4.5 percent to $6.8 billion (approximately Rs. 49,640 crores).

Nevertheless, Chief Financial Officer James Kavanaugh told Reuters an increased shift by companies to the cloud, a sales bounce in the global business services unit and a weaker dollar make the business optimistic that this year will return to revenue growth.

According to IBES data from Refinitiv, overall sales dropped 6.5 percent to $20.37 billion (roughly Rs. 1,48,700 crores), missing analysts’ average estimate of $20.67 billion (roughly Rs. 1,50,800 crores).

IBM received $2.07 (approximately Rs. 150) per share, above expectations of $1.799, excluding products (roughly Rs. 130).

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