IBM disappoints with better than expected results

IBM logoIt seems that IBM cannot really win.  It released results which were much better than expected but it appears that shareholders were not impressed.

Net profit rose to $4.1 billion, or $4.12 per share, from $3.2 billion, or $2.91 per share, a year earlier. On an adjusted basis, the company earned $4.32 per share, beating analysts’ average estimate of $4.29.

However, analysts were quick to find fault. At the heart of the problem was the IBM’s software business which only grew one percent in the quarter to $6.5 billion, slower than forecasts of three percent.

Software revenue was IBM’s bread and butter and it had been growing quite well over recent years. The slowdown means that IBM is getting fewer contracts.

IBM Chief Financial Officer Martin Schroeter expected that software revenue would pick up to mid-single digits in second half of 2014.

There were a few one off problems too. In January, IBM sold its customer care business, which brought in approximately $1.2 billion in full year revenue in 2013, to hardware distributor Synnex, a sale the company expects to negatively affect revenue comparisons by $300 million per quarter.

Last quarter, the company saw a $870 million restructuring fee, which was largely completed and contributed to savings quarter over quarter.

One bright point was that it saw growth in its strategic sectors as business analytics was up 7 percent, cloud revenue grew 50 percent, and security revenue rose 20 percent.

Revenue fell 2 percent to $24.4 billion in the second quarter, above analysts’ average estimate of $24.1 billion. The wooden spoon was won by the Asia Pacific region which fell nine per cent. Revenue in the Americas fell 1 percent/

Net profit rose to $4.1 billion, or $4.12 per share, from $3.2 billion, or $2.91 per share, a year earlier.