(Reuters) – International Business Machines Corp forecast full-year revenue below estimates after reporting a bigger-than-expected drop in first-quarter revenue on Tuesday, hurt by tapering demand for its latest mainframe computers and a stronger dollar.
FILE PHOTO: A man stands near an IBM logo at the Mobile World Congress in Barcelona, Spain, February 25, 2019. REUTERS/Sergio Perez/File Photo
Shares of the technology giant fell 2 percent after the company forecast 2019 adjusted operating profit to be a cent below analysts’ expectation of $13.91 per share.
Under Ginni Rometty’s stewardship, the company has shed many of its traditional hardware businesses and beefed up the growth areas through deals such as its $34 billion deal for Red Hat Inc, by far the company’s biggest acquisition.
IBM returned to annual revenue growth after seven years in the last quarter of 2018, triggering expectations that its strategy was taking roots.
Shares of the company have gained about 18 percent since reporting its fourth-quarter results in January.
However, in the reported quarter its cloud and cognitive segment, which includes analytics, cybersecurity and artificial intelligence, fell 1.5 percent to $5.04 billion, but beat FactSet estimates of $4.18 billion.
Revenue from its other main segments also fell and missed FactSet estimates.
“We see limited upside to revenues due to currency headwinds, tough comps from the mainframe cycle, and a potential pullforward of software revenues into Q4,” Bernstein analyst Toni Sacconaghi said.
IBM’s revenue slipped 4.7 percent to $18.18 billion in the first quarter ended March 31 and missed the average analyst estimate of $18.46 billion, according to IBES data from Refinitiv.
Its net income fell $1.59 billion, or $1.78 per share, compared with $1.68 billion, or $1.81 per share, a year earlier.
Excluding special items, the company earned $2.25 per share and beat analysts’ expectation of $2.22 per share.
Reporting by Sayanti Chakraborty in Bengaluru; Editing by Arun Koyyur