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By Robert McMillan
Updated April 18, 2016 5:34 p.m. ET
International Business
Machines Corp.’s
Virginia Rometty is still looking for a sales turnaround more than four years
into her tenure as chief executive.
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The Armonk, N.Y., company on Monday
reported first-quarter revenue of $18.68 billion, down 4.6% as the company’s
products have become increasingly under threat by the move to computing
services delivered over the Internet. The company has now posted revenue
declines for four years straight.
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The computing giant said that net
income fell 13.5% to $2.01 billion, or $2.09 a share. Excluding charges, profit
was $2.35 a share. Analysts had expected adjusted earnings for the March 31-ended
quarter, of $2.09 a share, according to a survey by Thomson Reuters. Revenue
came in above Wall Street’s expectation of $18.29 billion.
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Shares fell more than 4% in
after-hours trading on Monday after finishing up 81 cents at $152.53 in 4 p.m.
New York Stock Exchange trading.
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For Ms. Rometty, the reinvented IBM
is a company that is focused on high-growth businesses—delivering “cloud”
computing services over the Internet and building new products that can analyze
mountains of data and extract useful insights.
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But the going has been tough. IBM hasn’t been
able to solve its key problem: revenues are shrinking faster than its new
businesses are growing, and the company has laid off tens of thousands of
employees over the past year, even as it has hired tens of thousands of new
employees in these new businesses. IBM calls these new businesses “strategic
imperatives,” and said Monday that they grew 14% from the year-earlier period,
reaching $29.8 billion. They now account for 37% of IBM’s revenue.
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“If the strategic imperatives are really
working, then the company’s growth rate should be improving. The evidence so
far has suggested that has not happened,” said Toni Sacconaghi, an analyst at
Sanford C. Bernstein & Co. in an interview ahead of Monday’s earnings
release.
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During the latest quarter, IBM reported that
revenue from its strategic imperatives grew 17% excluding currency impacts,
including cloud revenue growth of 36% and a 9% increase in analytics revenue.
Systems revenue, which includes systems
hardware and operating systems software, declined 21% excluding currency
impacts. Global business services revenue, which includes consulting, global
process services and application management, declined 2.3%, also excluding
currency impacts.
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IBM also affirmed its 2016 outlook.
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IBM shares have dropped by 17% since Ms.
Rometty took over in January 2012; The S&P 500 index is up 65% during the
same period.
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As about two-thirds of IBM’s sales happen
outside of the U.S., IBM benefited from a softening U.S. dollar. The company is
also starting to see new revenues from the billions of dollars in acquisitions
it made over the past year, a period when IBM bought close to 20 companies,
including Merge Healthcare Inc., a medical technology company, cloud storage
company Cleversafe Inc. and Weather Company’s digital assets.
