International
Business Machines Corp.’s second-quarter earnings
declined 17% as the computing and tech services giant recorded weaker hardware
and services sales and significant workforce reduction expenses
IBM’s results are often read as an indicator of the
health of tech spending among government and corporate customers
The company is
known for aggressively shedding less profitable businesses and cutting costs
while bulking up its catalog of more unique offerings--such as consulting
services, analytics software and data-storage systems--where it can earn wider
margins
However, a number of analysts have raised concerns that
IBM, which makes much of its money selling software, hardware and computer
systems, may be on the wrong side of a major technology shift, known as cloud
computing
The latest period’s results follow a rare earnings miss
in the first quarter as sales of software and server products were particularly
weak, which prompted a round of restructuring at the companyThe most recent quarter included $1 billion in workforce reduction expenses
Overall, IBM reported a profit of $3.23 billion, or $2.91 a share, down from $3.88 billion, or $3.34 a share, a year earlier
Operating earnings, which exclude retirement-plan costs, amortization and workforce reduction charges, were $3.91 a share
Revenue slipped 3.3% to $24.92 billion, or down 1% when
adjusted for currency fluctuations
Analysts most recently predicted earnings of $3.77 a
share and revenue of $25.37 billion
Gross margin widened to 48.7% from 47.6%
Revenue in IBM’s systems-and-technology unit, which
includes its hardware business, fell 12%The unit has now seen year-on-year revenue declines for seven straight quarters
The software segment’s revenue rose 4.1%
Technology services revenue was down 4.6% while business services revenue slid 1.3%
Services backlog totaled $141 billion, unchanged from the first quarter
Nathalie Tadena
Dow Jones Newswires
1 comentario:
International Business Machines Corp. is asking the majority of employees in its lackluster systems business to take a mandatory extra week of vacation this month, instead of taking more extreme measures such as job cuts. Last month, the company reported disappointing second quarter results, including a 12% drop in revenue for the systems and technology business. It was the seventh straight quarter of year-over-year revenue decline for the business, which includes hardware.
On Monday, the tech giant told employees in systems and technology, and employees in its integrated supply chain who support them, that a majority of them in the U.S. will take a mandatory week furlough, beginning either August 24 or August 31. They will receive the equivalent of one-third of their pay for the week. Executives will not be paid for the week.
An IBM IBM spokesman declined to say for competitive reasons how many employees are in these businesses, nor how much the company would save by this measure.
“In lieu of other options considered, this approach best balances the interests of employees and the competitiveness of the STG business,” an IBM spokesman said in a statement.
Earlier on Tuesday, shares of IBM fell after its stock was downgraded by Credit Suisse analyst Kulbinder Garcha, who voiced concern that there is no organic growth at the company. One area he pointed to was the company’s mainframe and UNIX hardware businesses. which may become a drag sooner than many investors realize, and that the secular decline in these areas will have a big impact on IBM’s profitability. IBM has set a goal of meeting a target of $20.00 in earnings per share for 2015.
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