Feeds

China, an untapped land of opportunity for the West - EXCEPT IBM

Big Blue notches up SIXTH quarter of poor growth

Next gen security for virtualised datacentres

IBM's third-quarter earnings for 2013 missed estimates by a billion dollars, thanks to an ugly environment in China and continuing weakness in the company's hardware division.

The technology giant reported a net income of $4bn from revenues of $23.7bn on Wednesday, representing a rise in profits by 5.7 percent on the same quarter a year ago, but a 4.1 percent slump in revenue.

It sought to reassure investors that this quarter was due to some unforeseen factors, such as slow public-sector spending in China, along with tough environments for some of its software divisions. But since this marks the sixth quarter in which IBM has delivered flat to negative revenue growth, the company seems to be suffering from perpetual dog-ate-my-homework syndrome.

"We have had some very discrete difficulties as we've gone through the quarters," IBM's chief financial officer Mark Loughridge said on a call discussing the results.

Wall Street analysts had expected a revenue of $24.74bn, over a billion dollars above the figure IBM reported. Big Blue's shares were hit by the results and were down by 5.8 percent in after-hours trading.

IBM's business is having trouble on several different fronts, the company indicated in its earnings statement and subsequent conference calls, with slumps in sales in Asia and a major decline in hardware worrying investors.

Revenues for the quarter were split between the systems and technology division bringing in $3.2bn (down 16.6 percent on Q3 2012), the software segment doing $5.8bn (up 0.6 percent), a cool $9.5bn in global technology services (down 4.3 percent), $4.5bn in global business services (up 0.4 prcent), $502m in global financing (up 6.5 percent), and $122m in other.

It's an open secret that IBM is trying to sell its System x and Bladecenter server businesses to Chinese PC and system maker Lenovo, and with the results posted on Wednesday it's not hard to see why.

Total hardware systems revenues fell 19 percent compared with the third quarter of 2012, including an 18 percent slump in System x, a 38 percent fall in Power Systems, and an 11 percent decline in System storage.

IBM blamed the poor performance in hardware down to an eye-watering 22 percent slump in sales in China, which saw hardware sales to the country fall by a whopping 40 percent. This occurred because China is working on a new economic development plan and so some contracts haven't been happening, IBM executives said.

The falloff of business in China dragged down the Asia Pacific wing of Big Blue by 15 percent compared with the same quarter a year ago – whereas there was a one-percent decrease in the Americas, and a 2 percent fall in Europe and the Middle East.

"In the third-quarter we continued to expand operating margins and increased earnings per share, but fell short on revenue," IBM's chief executive officer Ginni Rometty, said in a canned statement. "Where we had identified high growth opportunities and pursued them aggressively – cloud, mobile, business analytics, and security – we continued to show strong growth. This underscores our strategy to continuously transform the company to high value".

That transformation may take time though: in this quarter IBM said that its "cloud" revenues now "exceeds $1bn" of which $460m is delivered-as-a-service, some of which comes from the company's strategically crucial buy of SoftLayer.

With one of its strategic areas representing somewhere under 5 percent of total revenues, IBM has a long way to go to re-tool its business for significant growth, we reckon. ®

Gartner critical capabilities for enterprise endpoint backup

More from The Register

next story
The Return of BSOD: Does ANYONE trust Microsoft patches?
Sysadmins, you're either fighting fires or seen as incompetents now
Microsoft: Azure isn't ready for biz-critical apps … yet
Microsoft will move its own IT to the cloud to avoid $200m server bill
Shoot-em-up: Sony Online Entertainment hit by 'large scale DDoS attack'
Games disrupted as firm struggles to control network
Cutting cancer rates: Data, models and a happy ending?
How surgery might be making cancer prognoses worse
Silicon Valley jolted by magnitude 6.1 quake – its biggest in 25 years
Did the earth move for you at VMworld – oh, OK. It just did. A lot
Forrester says it's time to give up on physical storage arrays
The physical/virtual storage tipping point may just have arrived
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
5 things you didn’t know about cloud backup
IT departments are embracing cloud backup, but there’s a lot you need to know before choosing a service provider. Learn all the critical things you need to know.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?