IBM missed on revenue for its eighth of nine quarters in a row on Mon. as it reported Q1 2015 financial results, though earnings again beat Wall St. consensus in a hopeful result skewed by tough foreign currency headwinds.
Big Blue reported revenue of $ 19.6 billion for the quarter, $ 100 million less than analysts had predicted and down 12% year-to-year. The company cleared expectations for earnings by ten cents a share, reporting $ 2.91 against a consensus of $ 2.81, a 9% improvement from last year. The company also reported non-GAAP net income growth of $ 2.9 billion, a 4% bump.
The results didn't shock traders, as shares of IBM, which had been up $ 5.49 during trading hours, or 3.42%, were about flat in after-hours trading, first down $ 0.32, or about 0.19%, as of 4:35pm ET and then swinging up $ 0.54, or 0.32%, as of 5pm ET. The initial dip could in part be explained by the rising price the company had picked up during the day, leaving investors to figure out what upside was left after the earnings report.
While IBM's software business continued to bleed revenue, bringing in $ 5.2 billion, 8% less year-to-year and more than the 7% decrease of one quarter ago, its cloud business, so critical to CEO Ginni Rometty's eventual plan to turn around the company, saw key growth of 60%, with cloud as a service took in $ 3.8 billion in revenue. Another important strategic driver, business analytics, bumped up 12%. "In the first quarter we had a strong start to the year," Rometty wrote in the company's earnings release.
IBM's hardware business, one that it's been stripping of key pieces in recent months such as through the sale of its System x business to Lenovo for $ 2.3 billion, even jumped 30% in revenue if not for currencies, thought it was down 23% when the loss of that unit's revenue and currencies were factored in. The company kept the same amount of services backlog on the books as a year ago adjusting for the currency headwinds and its divested businesses, and kept the same outlook for the full year 2015. It had lowered those expectations last quarter, helping send its stock price on a tumble at the time.
The combination of the services backlog holding its own and IBM's strategic imperatives growing a bit faster–20% at constant currencies compared to 16% last quarter–are a positive sign for some experts.
"I would say that IBM is executing well as it transforms itself," says Edward Jones analyst Josh Olson. "While the world is moving to cloud at a quicker pace, IBM is beginning to get traction and beginning to participate."
On its analyst call after the earnings release, IBM was similarly bullish. "The results for this quarter represent a transformation in our business," CFO Martin Schroeter said on the call. "We see the results we delivered as another proof point that the action we are taking is starting to pay off."
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