April 16, 2019 / 8:19 PM / 7 days ago

IBM quarterly revenue misses on weak mainframe computer business

(Reuters) - International Business Machines Corp reported a bigger-than-expected drop in first-quarter revenue on Tuesday, hurt by tapering demand for its mainframe computers and a stronger dollar, sending its shares down about 3 percent.

FILE PHOTO: The logo for IBM is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 27, 2018. REUTERS/Brendan McDermid

The technology giant’s revenue at all its main business units except cloud, which has been the centerpiece of its turnaround strategy, missed analysts’ estimates.

IBM’s cloud and cognitive segment, which includes analytics, cybersecurity and artificial intelligence, fell 1.5 percent to $5.04 billion in the quarter, but beat FactSet estimates of $4.18 billion.

“We saw good acceleration in our cloud business... We now have an improving trajectory as we move forward,” Chief Financial Officer Jim Kavanaugh said.

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 acquisition for Red Hat Inc.

IBM returned to annual revenue growth in the last quarter of 2018, triggering expectations that its strategy was taking roots.

The company’s systems segment, which houses its mainframe computer business, fell 11.5 percent to $1.33 billion in the reported quarter, missing FactSet estimates of $1.37 billion.

Its overall 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 to $1.59 billion, or $1.78 per share, in the quarter ended March 31 from $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.

The company on Tuesday maintained its adjusted operating profit for 2019 to be “at least” $13.90 per share. Analysts on an average were expecting $13.91 per share.

Reporting by Sayanti Chakraborty in Bengaluru; Editing by Arun Koyyur

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