International Business Machines Corp reported on Monday a 12th consecutive quarterly revenue decline, dragged by currency headwinds and divestitures, while also claiming an acceleration in its refocusing into the cloud and mobile markets.
The worlds biggest technology services firm said it generated revenue of $19.6 billion in the quarter ended March 31st, 12% lower than the $22.2 billion reported a year earlier. This was largely in line with analysts projections for $19.64 billion.
Negative currency effects accounted for 8% of the revenue decline, IBM said, while divestments of businesses made up for another 4%. Leaving aside these factors, performance was flat, sounding a somewhat positive note following the previous quarters 2% revenue drop.
Net income fell to $2.3 billion in the first quarter compared to $2.4 billion a year earlier. Profit rose to $2.35 on a per share basis from $2.29 a year ago as there were fewer outstanding shares. Non-GAAP EPS, excluding some charges, rose 9% from a year earlier to $2.91, topping analysts forecasts of $2.80.
The potential recovery was attributed to a 30% jump in revenue from strategic imperatives such as cloud and analytics, which are considered the companys pivot for reviving its struggling operations. IBM said cloud revenue jumped by more than 60% in the first quarter while business analytics grew 12%, with both figures taking into account currency and divested businesses, otherwise over 75% and 20%, respectively.
“In the first quarter we had a strong start to the year,” said Ginni Rometty, IBM chairman, president and chief executive officer. “Our strategic imperatives growth rate accelerated, demonstrating the power of our offerings in these new opportunities and contributing to improved revenue performance.”
The company also reaffirmed its full-year guidance for operating (non-GAAP) earnings per share of $15.75 to $16.50 and flat free cash flow.
IBMs revenue has been shrinking over the past three years as the tech group moved to divest low-profit businesses such as cash registers, low-end servers and semiconductors, shifting focus to lucrative emerging businesses like cloud and security software. However, despite the soaring sales in these businesses, the refocusing has so far failed to offset the loss of revenue to divestiture.
Martin Schroeter, chief financial officer, defended in an interview with the Financial Times the companys decision to open its Power chip technology to Chinese competitors so that they can build computer systems based on IBMs technology on their own. Although this would lead to IBM selling fewer of its own systems initially, the company hopes to benefit from the much wider integration of the technology and cash in on IP licensing. The first Chinese Power systems will go on sale shortly, Mr. Schroeter said.
IBM shares settled 3.42% higher on Monday in New York at $166.16 per share, trimming the companys one-year drop to 12.6% and valuing it at $164.24 billion. Shares were up 0.50% at $166.99 at 10:13 GMT in pre-market trading on Tuesday. According to CNN Money, the 21 analysts offering 12-month price forecasts for IBM have a median target of $160.00, with a high estimate of $198.00 and a low estimate of $125.00. The median estimate represents a -3.71% decrease from the last price of $166.16.
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