IBM shares fall on unexpectedly weak quarterly gross sales

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International Business Machines Corporation (IBM) Chief Executive Officer Arvind Krishna wears a face mask as he attends a meeting with President Joe Biden (not pictured) in the East Room of the White House in Washington, DC, USA on Wednesday. August 25, 2021. Business executives from around the world join Biden to discuss how industry and the federal government can work together to improve cybersecurity in the face of debilitating ransomware and cyberattacks. Photographer: Stefani Reynolds / Bloomberg via Getty Images

Stefani Reynolds | Bloomberg | Getty Images

IBM shares fell as much as 5% in expanded trading Wednesday after the company released third quarter results, including lower earnings than analysts expected.

This is how the company did it:

  • Merits: $ 2.52 per share, adjusted, down from $ 2.50 per share analyst expects, Refinitiv said.
  • Revenue: $ 17.62 billion versus $ 17.77 billion as analysts expected, Refinitiv said.

The sales of the enterprise hardware manufacturer and consulting provider rose slightly compared to the previous year, according to a statement. Sales rose 3% in the previous quarter. Net income declined 33% as the company’s gross margin decreased to 46.4% from 48% in the previous quarter.

The results “were below our expectations,” said IBM CEO Arvind Krishna analysts in a conference call.

IBM expects to outsource the managed infrastructure part of Global Technology Services under the name Kyndryl in early November. Excluding the Kyndryl share, sales increased 2.5%. This is approaching Krishna’s stated goal of medium-term sales growth in the mid-single-digit range.

The Global Services segment, which includes managed services, outsourcing and support, contributed $ 6.15 billion to sales. That was about 5% less than a year earlier and below the consensus of $ 6.25 billion from analysts polled by StreetAccount.

Some clients were reluctant to start projects in the quarter as the Kyndryl deal is imminent, Krishna said.

In 2022, IBM will refine its sales force compensation to improve performance, “because the only way they can get anywhere near target incentives is to make their software a number,” said Krishna.

The Cloud & Cognitive Software business, including Red Hat, had sales of $ 5.69 billion, up 2.5% and less than the StreetAccount consensus of $ 5.77 billion.

Revenue for IBM’s global advisory unit rose approximately 12% to $ 4.43 billion, beating StreetAccount’s consensus of $ 4.29 billion.

System revenue, including hardware, was $ 1.11 billion, down nearly 12% and below the consensus of $ 1.23 billion.

“In a competitive labor market, this puts some pressure on our labor costs, including higher acquisition and retention costs, which is not yet reflected in our current prices,” said Jim Kavanaugh, IBM’s chief financial officer. “We expect to capture this value on future engagements, but it will be some time before we appear in our margin profile.”

The company did not provide any guidance.

Prior to the report, IBM stocks rose about 13% that year, trailing the S&P 500’s 21% gain.

During the reporting period, IBM released details of an artificial intelligence processor and announced plans to purchase hybrid cloud consulting firms BoxBoat Technologies and Bluetab Solutions Group.

SEE: IBM’s CEO talks about Red Hat’s growth and its role in the company’s hybrid cloud strategy

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