IBM Posts Wide Third-Quarter Miss
International Business Machines Corp (NYSE:IBM) said it no longer expected to achieve its 2015 operating earnings target of at least $20 per share after weak client spending resulted in an unexpected fall in quarterly earnings and revenue.
IBM's shares fell more than 9 percent in premarket trading.
The world's largest technology services company, which said it would announce a new target in January, reported a 4 percent drop in revenue as clients held back on spending in September.
"IBM needs to find success and growth in the cloud through organic and acquisitive means in our opinion, otherwise there could be some darker days ahead for the tech giant (and its investors)," FBR Capital Markets analyst Daniel Ives wrote in an email.
Chief Executive Ginni Rometty expressed disappointment in the results.
"We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry," she said in a statement.
IBM's revenue fell to $22.4 billion in the third quarter ended Sept. 30 from $23.34 billion a year earlier. Analysts had expected $23.37 billion, according to Thomson Reuters I/B/E/S.
Net profit from continuing operations fell to $3.46 billion, or $3.46 per share, from $4.14 billion, or $3.77 per share in the same quarter last year.
On an adjusted basis, the company earned $3.68 per share, missing the average analyst estimate of $4.31 per share.
IBM, which has been restructuring to focus on high-end products like Cloud, mobile security and Big Data, also said on Monday that it would hive off its loss-making semiconductor unit to contract-chipmaker Globalfoundries Inc.
IBM will pay Silicon Valley-based Globalfoundries $1.5 billion in cash over the next three years to take the chip operations off its hands, and it took a pre-tax charge of $4.7 billion in the quarter related to the deal.
IBM shares were trading at $169.70 before the bell, after closing at $182.07 on the New York Stock Exchange on Friday. (Reporting by Anya George Tharakan in Bangalore; Editing by Don Sebastian and Ted Kerr)