Big Blue released its Q3 numbers last night and it’s makes for grim reading. IBM revenues slipped below analysts' expectation as poor economic conditions around the world hit profits in American global corporations.
Hardware a Problem for IBM In Q3
Not that there is any real concern about the future of IBM. Mark Loughbridge, the company's CF0, stands by his predictions of a good year for IBM when it rounds up things at the end of the fourth quarter. That said, there is trouble in the kitchen. Hardware sales seem to be the principal problem this time around, even if figures in other IBM business segments were far from overwhelming.
Overall, the company reported a third-quarter profit of US$ 3.82 billion, down from US$ 3.84 billion a year earlier, with revenue sliding 5.4 percent to US$ 24.75 billion.
But if this were an "IT Christmas Carol," we might be citing the Ghost of Leo Apothekar-Past, as the drop of 13 percent in hardware sales that IBM experienced over the quarter is more than just a market hiccup.
Apothekar, you may remember, had tried to pull HP out of hardware last year, predicting that hardware was in for a rough ride. The move that cost him his CEO stripes at HP.
But it seems now that he was only reacting to the reality of a market that is steadily shrinking, as governments and large enterprises in Europe extend their IT replacement cycles and hold onto the hardware they have, in order to cut costs.
Global Problems
Indeed much of the revenue shortfall that we see in this set of figures was blamed on the economic woes in Europe, which translated not only into falling sales, but also fewer dollars for every sale, thanks to a weaker euro.
There were also signs of slowdown in the company’s technology-consulting services, but there were other problems as well. The problems included:
- Geography: It wasn’t just Europe that performed badly — the US and Australia didn’t do too well, either. Revenue in US was US$ 10.4 billion, down 4 percent from a year earlier. Europe, the Middle East and Africa earned revenues of US$ 7.2 billion, down 9 percent on last year. Asia-Pacific managed to rise by 1 percent to US$ 6.5 billion, showing that India and China, despite everything, are still strong performers.
- Software: This is generally considered one of the indicators of company health and this time around it didn’t do too badly, although it has performed better in the past. Revenues here were US$ 5.8 billion, with revenues from its middleware products like Tivoli, Lotus and WebSphere down 1 percent to US$ 3.6 million.
- Systems and Technology: This includes hardware and totaled US$ 3.9 billion, down 13 percent on this time last year. Revenue for systems sales and services not including retail systems were down 8 percent on the year. System Storage revenue decreased by 10 percent from a year earlier. IBM says it was hit by the sale of its point-of-sale technology to Toshiba, was well as the introduction of new mainframe equipment that hit earlier lines.
IBM’s Cloud, Analytics, Social Business
However, IBM has invested in technologies that are quickly becoming the wave of the future, and expects to ride out difficult times using this.
By 2015, it has said on previous occasions, it is expecting to add US$ 20 billion to its revenue through cloud computing, analytics, its smarter planet initiative and investments in emerging markets.
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Source : cmswire[dot]com