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Oct. 17, 2019, 7:20 a.m. EDT

IBM stock slips after revenue misses Street view

IBM reports fifth straight quarter of revenue declines, sees ‘sustained revenue growth’ in 2020

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By Wallace Witkowski, MarketWatch


Bloomberg News

International Business Machines Inc. shares fell in premarket trade Thursday, after the tech giant reported less revenue than Wall Street expected, but the company said it sees sustainable revenue growth in 2020 after more than a year of declines.

IBM /zigman2/quotes/203856914/composite IBM -0.04%  shares fell 5.1% after hours, following a 0.6% decline in the regular session to close at $142.11, and were down 4.8% premarket Thursday. In comparison, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.05%  closed down 0.1%, the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.40%  declined 0.2% and the tech-heavy Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +2.13%  dipped 0.3%.

The company reported third-quarter net income of $1.67 billion, or $1.87 a share, compared with $2.69 billion, or $2.94 a share, in the year-ago period. Adjusted earnings were $2.68 a share.

Revenue declined to $18.03 billion from $18.76 billion in the year-ago quarter with lower-than-expected revenue coming in from the company's global technology services segment. This marks the fifth quarter in a row that IBM’s year-over-year revenue has declined.

Analysts surveyed by FactSet had forecast earnings of $2.66 a share on revenue of $18.23 billion.

Global technology services, or GTS, posted $6.7 billion in revenue compared with the $6.77 billion Street consensus.

“What I’ve seen play out in third quarter, while we’ve got a headwind right in front of us on GTS in fourth quarter, nothing would change my mind with regards to 2020 on driving sustainable revenue growth overall,” said Chief Financial Officer Jim Kavanaugh on the analyst call.

Kavanaugh said he was “very pleased” with the contribution from Red Hat, which brought in $371 million in revenue for the quarter, up about 20% on a normalized basis. The Red Hat acquisition closed in July.

The company reported cloud and cognitive software revenue — which includes Red Hat — of $5.28 billion while analysts had been looking for $5.43 billion.

Global business services revenue was $4.12 billion, in-line with expectations, and systems revenue was $1.48 billion while the Street expected $1.52 billion.

Cloud-based revenue, which is spread across all segments, rose 11% to around $5 billion. The company reported cloud revenue of $1.1 billion in the cloud and cognitive software segment, $1.3 billion in global business services, $2.1 billion in global technology services, and $500 million in systems.

IBM expects adjusted earnings of “at least $12.80” for the year, while the Street expects $12.80.

/zigman2/quotes/203856914/composite
US : U.S.: NYSE
$ 126.70
-0.05 -0.04%
Volume: 3.53M
Aug. 12, 2020 4:00p
P/E Ratio
14.38
Dividend Yield
5.15%
Market Cap
$112.88 billion
Rev. per Employee
$208,845
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,976.84
+289.93 +1.05%
Volume: 342.07M
Aug. 12, 2020 5:10p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,380.35
+46.66 +1.40%
Volume: 2.25B
Aug. 12, 2020 5:10p
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/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
11,012.24
+229.42 +2.13%
Volume: 3.35M
Aug. 12, 2020 5:16p
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Wallace Witkowski is a MarketWatch news editor in San Francisco. Follow him on Twitter @wmwitkowski.

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