IBM third-quarter revenue falls short of expectations, stock sees decline

By Bree Fowler, AP

NEW YORK–IBM said Wednesday that its third-quarter net income rose 6 percent, but its revenue fell and missed Wall Street’s expectations by more than US$1 billion. The company’s stock fell in extended trading.

The Armonk, New York, computing company earned US$4.04 billion, or US$3.68 per share, up from US$3.82 billion, or US$3.33 per share, in the same quarter last year. Excluding one-time charges, the company earned US$3.99 per share, above expectations of US$3.96.

Revenue dropped 4 percent to US$23.7 billion from US$24.7 billion. That fell short of the US$24.8 billion expected by analysts surveyed by FactSet. Adjusted for the effects of foreign currency exchange rates, the company said revenue fell 2 percent.

IBM is the world’s largest technology-services company. Its results provide a gauge of businesses’ appetite for technology spending. IBM has grown its earnings each quarter in the past decade, a streak that likely extended through the first quarter of this year.

The company’s business has been stable because many of its customers sign long-term contracts that guarantee regular revenue, even when the economy is tough. It also helps that IBM no longer has a direct connection to the personal computer industry, where a sales slump has been hurting the makers of microprocessors and desktop and laptop computers.

Even so, revenue for its services business fell 3 percent. It’s hurt by currency fluctuations, which can translate to fewer dollars IBM makes on overseas sales. Adjusting for that, services revenue would have been up 1 percent.

Systems and technology revenue tumbled 17 percent, and the division lost US$167 million during the quarter. Software revenue rose 1 percent.

In after-market trading, IBM shares fell US$11.08, or 6 percent, to US$175.65. They finished the regular session up US$2.07 at US$186.73.

IBM said results for the July-September period were helped by lower expenses, including a steep drop in its tax rate and the absence of US$408 million in charges related to job cuts that it logged in the year-ago period.

The company also noted that its revenue for Internet-based services is up more than 70 percent so far this year.

International Business Machines Corp. said it’s working to improve results in certain growth markets and certain hardware businesses that are lagging. As a result, it still expects to post an adjusted 2013 profit of at least US$16.90 per share. Analysts expect earnings of US$16.87 per share.