IBM delivered a quarterly performance that shows the steady headway it is making in new businesses led by cloud computing and data-analysis software, like its Watson artificial intelligence technology.
However, the company’s transformation remains very much a work in progress. The erosion of some of its hardware and software products continues to be a drag on growth and profits, overshadowing the gains in the new fields.
IBM on Monday reported a 21 percent decline in net profit from continuing operations, to US$2.3 billion in the first quarter that ended March 31.
Its operating earnings per share fell 19 percent, to US$2.35 a share, though that was above the average estimate of Wall Street analysts of US$2.09 a share, as compiled by Thomson Reuters.
The company’s first-quarter revenue declined 5 percent, to US$18.7 billion, but that was ahead of analysts’ consensus forecast of US$18.29 billion.
After adjusting for the effect of currency translation, revenue was down 2 percent.
Until IBM turns the corner, with the new businesses growing faster than older lines decline, the outcome of the company’s renewal campaign remains in doubt.
“They may be doing the right things, but the jury is still out on whether the transformation is afoot,” said A.M. Sacconaghi, an analyst at Sanford C. Bernstein & Co.
IBM shares fell about 5 percent in after-hours trading, a retreat from a recent uptrend for the stock. In the first three months of this year, IBM’s stock price had increased 17 percent.
The report for the quarter was cluttered with special gains and charges.
The gains included a US$1 billion rebate from the Japanese tax authorities for a previous overpayment.
IBM’s revenue was helped somewhat as the businesses of recently acquired companies were counted, including the data and computing assets of The Weather Co.
IBM took a US$1 billion charge in the quarter for severance and other payments for workers who are being laid off.
Analysts have estimated the number of affected workers at 14,000 or more worldwide.
For the last decade, IBM has taken yearly charges of US$500 million to US$1.5 billion for these cutback programs, which it calls “workforce rebalancing.”
As it is laying off workers in some parts of the business, it is typically hiring elsewhere.
Yet in the last two years, IBM’s total employment has declined 12 percent, to 377,757 workers at the end of last year.
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