International Business Machines Corp. reported a decrease in third-quarter sales and net income as the company faces difficulties shifting to cloud technology.
On Monday IBM released its results for the three months ended September 30. The company stated a 4% decline in revenue, down to $22.4 billion, while net income fell to $18 million, or 2 cents per share, from $4.04 billion, or $3.68 per share, a year earlier.
Shares plunged and reached a three-year low as the company abandoned a five-year plan to boost profits and earn $20 per share next year. IBM’s biggest shareholder, Warren Buffett, lost nearly $1 billion of his investment as the stock opened with more than a 6.5% gap.
The news also affected the Dow Jones Industrial Average, which dropped more than 70 points. However, later in the session, it recovered and climbed 0.1% on Monday.
The company counted on strong revenue during the second half of the year, but due to the fact that more and more customers switch to cloud storage rather than hardware, IBM posted weaker-than-expected software sales and lower productivity in services in the third quarter.
The Armonk, New York-based company was also hit by lower demand from buyers in Brazil, China, India, Russia and South Africa, where sales fell 7% in the recent quarter.
“We are disappointed in our performance,” CEO Ginni Rometty said. “We saw a marked slowdown in September in client buying behaviour, and our results also point to the unprecedented pace of change in our industry.”
This is the tenth consecutive quarter that IBM reports flat or declining revenues. The tech giant also unveiled an unusual deal to transfer its semi-conductor unit to GlobalFoundries by paying $1.5 billion as part of the agreement. The company, however, said that this move would save billions of dollars that would have been spent on upgrading facilities for the next generation chip technology.
Across the industry results vary. German software group SAP and the U.S. Oracle are also experiencing problems with customers moving onto cloud technology, while Apple reported on Monday a 13% profit increase.
“IBM needs to find success and growth in the cloud through organic and acquisitive means,” said Daniel Ives, an analyst at FBR Capital Markets. “Otherwise there could be some darker days ahead for the tech giant and its investors.”
International Business Machines Corp. lost 7.11% on Monday in New York and closed at $169.10, marking a one-year decrease of 2.69%. The company is valued at $168.69 billion. According to the Financial Times, the 19 analysts offering 12-month price targets for International Business Machines Corp. have a median target of $190.00, with a high estimate of $225.00 and a low estimate of $160.00. The median estimate represents a 12.36% increase from the last price of $169.10.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
