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Bloomberg
IBM missed estimates for quarterly revenue, with sales in a key unit declining for the second consecutive period, further extending Chief Executive Officer Ginni Rometty’s turnaround plan into its fifth year without significant progress.
Sales in the company’s technology services and cloud platforms segment dropped 5.1 percent from the same period a year earlier, even though executives had said in April that they expected key contracts to come through in the quarter. The unit is a marker for the strength of the company’s push into newer technologies. Total revenue fell to $19.3 billion, IBM said in a statement, 21st straight quarter of year-over-year declines.
International Business Machines Corp. has been working since before Rometty took over in 2012 to steer the company toward services and software, and she has pushed it deeper into businesses such as artificial intelligence and the cloud. Still, legacy products like computers and operating system software have been a drag on overall growth. Some investors are getting tired of waiting for the turnaround to catch on. Warren Buffett’s Berkshire Hathaway Inc. sold about a third of its investment in IBM during the first half of this year.
Gross margins in the second quarter were 47.2 percent, slightly beating the average analyst estimate of 47 percent. That’s better than last quarter, when a surprise miss on margins sent the stock tumbling the most in a year.
“We will continue to see, on a sequential basis, margin improvement from the first half to second half,†Chief Financial Officer Martin Schroeter said in an interview. Operating profit, excluding some items, was $2.97 a share, compared with the average analyst estimate of $2.74 a share.
The company’s cognitive solutions segment, which houses much of the software and services in the newer businesses and includes the Watson artificial intelligence platform, has shown the most promise in recent periods, growing in each of the previous four quarters.