IBM posts 4 per cent drop in quarterly revenue, shares slump

IBM reported a 4 per cent drop in quarterly revenue as client activity slowed in September, sending its shares down sharply in premarket trade.

Total revenue fell to $22.4 billion in the third quarter ended Sept. 30 from $23.34 billion a year earlier.

Analysts had expected revenue of of $23.37 billion, according to media.

The world's largest technology services company's net profit from continuing operations fell to $3.46 billion, or $3.46 per share, from $4.14 billion, or $3.77 per share in the same quarter last year On an adjusted basis, the company earned $3.68 per share, missing the average analyst estimate of $4.31 per share.

"We are disappointed in our performance," Chief Executive Ginni Rometty said in a statement.

"We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry," she said.

IBM's shares were down 7.3 per cent at $168.73.

The company, which has been restructuring to focus on high-end products like Cloud, mobile security and Big Data said it would hive off its loss-making semiconductor unit to contract-chipmaker Globalfoundries Inc.

IBM will pay Silicon Valley-based Globalfoundries $1.5 billion in cash over the next three years to take the chip operations off its hands, and it took a pre-tax charge of $4.7 billion in the quarter related to the deal.
"IBM delivered soft results across the board, which speaks to the headwinds they are seeing the field on the heels of execution issues, secular challenges, and a mature product/services foothold," FBR Capital Markets analyst Daniel Ives wrote in an email.

"IBM needs to find success and growth in the cloud through organic and acquisitive means in our opinion, otherwise there could be some darker days ahead for the tech giant (and its investors)," he said.