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IBM revenue down for the 14th quarter, cuts profit forecast

October 20
8:00 AM 2015

International Business Machines Corp (IBM) has announced more than projected fall in revenues as the stronger US currency put pressure on demand from China and other emerging economies. As a result, IBM has lowered its profit forecast for the full year. The revenues were down 13.9 percent to $19.28billion for the quarter ending September as against the forecast of $19.62bn. The latest drop in revenues marks the continuous fall for 14 quarters in a row.

China's economy slowdown has drastically hit the IBM's revenues. More particularly IBM sales were hit in four nations of BRICs.

The New York-based world's largest technology services company has successfully shed the low margin business, but still struggling to bridge the gap with new measures in exploring the potential of cloud computing. IBM shares were trading lower at $14.95.  

The declining number of deals from Chinese market has pushed down IBM revenues by 17 percent. Adding further to the woes, IBM sales in Brazil, Russia and India were eased by 30 percent. The four major markets from BRICS group have impacted IBM revenues significantly.

The 104-year-old IT giant is facing several challenges as corporate consumers shifting to low-cost hardware and inexpensive cloud computing services available on the internet. The earnings per share (EPS) expected to be in the range of $14.75 and $15.75 lower than previous guidance of $15.75-16.50.

Elaborating further on IBM performance, IBM's CFO Martin Schroeter said: "Our customers have complex environments and many are asking us to help them navigate that complex environment. That takes time." IMB has launched cognitive Business Solutions unit, which will have 2,000 analytics experts on artificial intelligence and machine learning products. The unit will work on global business services group of IBM.

The overseas business accounts for over 50 percent of IBM's total revenues. The strengthening US dollar has further eroded revenues by nine percent. The revenues fell 13.9 percent to $19.28billion during the quarter as against the analysts' forecast of $19.62bn. 

"This is another example of the massive headwinds that large-cap traditional tech stalwarts are seeing in this ever-changing environment, as more customers move to the cloud," observes FBR Capital Markets analyst Daniel Ives.

The net income dropped to $2.96bn or 43.02 per share from $3.46bn or $3.46 per share. The consolidated net income rose to $2.95bn or $3.01 per share from $18bn or 2cents per share. The pre-tax charge of $3.3bn net of tax impacted the profits of IBM.

The weakness in consulting and storage business caused for the drop in revenues, according to Schroeter. The currency fluctuations and discontinued businesses have been taken into consideration before making estimates, he said. "I would characterize it as the consulting and systems integration business moving away from these large, packaged applications and the storage business moving to flash and to the cloud," Schroeter said in an interview to Reuters.

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