Earnings Decline at IBM, but Cloud Shows Progress

By Lohr, Steve | International New York Times, April 20, 2016 | Go to article overview

Earnings Decline at IBM, but Cloud Shows Progress


Lohr, Steve, International New York Times


The company reported a 21 percent decline in earnings for the first quarter, though operating earnings per share were above estimates.

IBM has delivered a quarterly performance that shows the steady headway it is making in new businesses led by cloud computing and data-analysis software, like its Watson artificial intelligence technology.

But the company's transformation remains very much a work in progress. The erosion of some of its hardware and software products continues to be a drag on growth and profits, overshadowing the gains in the new fields.

IBM on Monday reported a 21 percent decline in net profit from continuing operations, to $2.3 billion in the quarter that ended March 31. Its operating earnings per share fell 19 percent, to $2.35 a share, though that was above the average estimate of Wall Street analysts of $2.09 a share, as compiled by Thomson Reuters.

The company's first-quarter revenue declined 5 percent, to $18.7 billion. But that was ahead of analysts' consensus forecast of $18.29 billion. After adjusting for the impact of currency translation, revenue was down 2 percent.

Until IBM turns the corner, with the new businesses growing faster than older lines decline, the outcome of the company's renewal campaign remains in doubt.

"They may be doing the right things, but the jury is still out on whether the transformation is afoot," said A.M. Sacconaghi, an analyst at Sanford C. Bernstein & Company.

IBM shares fell about 5 percent in after-hours trading, a retreat from a recent uptrend for the stock. In the first three months of this year, IBM's stock price had increased 17 percent.

The report for the quarter was cluttered with special gains and charges. The gains included a $1 billion rebate from the Japanese tax authorities for a previous overpayment. IBM's revenue was helped somewhat as the businesses of recently acquired companies were counted, including the data and computing assets of the Weather Company. …

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