IBM third quarter revenue
falls, but tops forecasts on cloud, analytics growth
Send a link to a friend
[October 18, 2016]
By Narottam Medhora and Nayyar Rasheed
(Reuters) -
International
Business Machines Corp posted better-than-expected third-quarter revenue
on Tuesday, helped by growth in the company's cloud and analytics
businesses.
Under Chief Executive Ginni Rometty, the technology services company has
shifted toward more profitable areas, such as cloud services, artificial
intelligence, analytics, and security while trimming its traditional
hardware and services businesses.
Revenue from those areas, which the company calls "strategic
imperatives," rose 16 percent to $8 billion in the third quarter. Cloud
revenue jumped 44 percent compared with a 30 percent rise in the second
quarter, it said.
However, shares of IBM, which reported its 18th straight quarter of
declining revenue, were down 3.1 percent at $150.60 in after-market
trading.
![](http://archives.lincolndailynews.com/2016/Oct/18/images/ads/current/Lincoln-Heating-sda-HI-2015.png)
IBM has made a string of acquisitions focused on elements of its
strategic imperatives business, including The Weather Company and Truven
Health, spending $5.45 billion so far this year. In comparison, the
company spent $821 million on acquisitions in the same period last year.
IBM's operating gross margin fell 2.1 percentage points to 48 percent in
the quarter, as a result of higher investments in the company's cloud
business and the shift to a subscription-based as-a-service model.
"We're building cloud data centers which don't come online at 90 percent
utilization, you build utilization as you ramp," said IBM Chief
Financial Officer Martin Schroeter in an interview with Reuters.
Schroeter added that IBM would continue its pace of investments due to
demand for the company's as-a-service offerings.
"Gross margins declined 210 basis points and that was due to - probably
- product mix and a higher level of overall investment for some new
higher-margin products," said David Holt, an analyst at CFRA Research.
[to top of second column] |
![](../images/101816pics/busine1.jpg)
A woman passes by the IBM offices in New York City, U.S., October
17, 2016. REUTERS/Brendan McDermid
![](../images/ads/current/demay_inv-lda081412.png)
The Armonk, New York-based company maintained its full-year adjusted
earnings forecast of at least $13.50 per share.
The company's revenue marginally fell to $19.23 billion in the quarter
ended Sept. 30 from $19.28 billion a year earlier, but beat the average
analyst estimate of $19 billion, according to Thomson Reuters I/B/E/S.
Net income fell to $2.85 billion, or $2.98 per share, from $2.95
billion, or $3.01 per share.
Excluding items, IBM earned $3.29 per share, beating analysts' average
estimate of $3.23 per share.
Up to Monday's close, the Dow Jones industrials component's shares had
risen nearly 12.5 percent so far this year, outperforming the 3.8
percent gain in the broader index.
(Reporting by Narottam Medhora and Nayyar Rasheed in Bengaluru;
additional reporting by Anya George Tharakan; editing by Maju Samuel, G
Crosse)
[© 2016 Thomson Reuters. All rights
reserved.] Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
![](http://archives.lincolndailynews.com/2016/Oct/18/images/ads/current/symphony_lda_HALLOWEEN_2016.png) |