Stock falls more than 2% in after-hours trading despite preannouncement of numbers that coincided with news of impending spinoff
International Business Machines Corp. revenue continued to decline in the third quarter, according to a Monday earnings report, and shares sank in after-hours trading as the company said it would not provide an outlook.
On a conference call, IBM IBM, -0.32% Chief Financial Officer James Kavanaugh said the company would be taking charges of $2.3 billion in the fourth quarter “to simplify and streamline our business” as the company transitions to spinning off its IT outsourcing business. “Given this uncertainty and consistent with our direction for most of this year, we are not going to provide guidance.”
“We are making strategic decisions, taking actions, and increasing investments today to better position our business and accelerate our top line growth on a sustainable basis,” Chief Executive Arvind Krishna said on the call.
Analysts surveyed by FactSet expect adjusted fourth-quarter earnings of $4.09 a share on revenue of $20.81 billion.
The company reported third-quarter net income of $2.3 billion, or $2.58 a share, compared with $2.68 a share in the year-ago period. Earnings from continuing operations were $1.89 a share, compared with $1.87 a share in the year-ago period. Revenue fell to $17.6 billion from $18.03 billion in the year-ago quarter, continuing a long-term sales decline that has seen revenue fall year-over-year in all but four of the past 33 quarters.
IBM had reported preliminary earnings of $2.58 a share on revenue of $17.6 billion earlier this month, and analysts surveyed by FactSet had shifted their estimates to an average of $2.58 a share on revenue of $17.54 billion.
Shares, which had been down about 1% following the earnings report, were down about 2.5% during the conference call. Those share moves followed a 0.3% decline in the regular session to $125.52.
IBM has focused on hybrid-cloud technology of late, including with the spinoff news, which was messaged as a way to focus more on that area. IBM claimed total cloud revenue, which is spread among some of its segments, increased 19% to $6 billion.
Global technology services, or GTS, posted $6.5 billion in revenue compared with $6.7 billion in the year-ago quarter and the $6.25 billion Street consensus. The company reported cloud and cognitive software revenue — which includes its Red Hat unit — of $5.6 billion compared with $5.28 billion a year ago, while analysts had been expecting $5.48 billion.
Global business services revenue was $4 billion, compared with $4.12 billion a year ago, and Street forecasts of $3.9 billion. Systems revenue was $1.3 billion, compared with $1.48 billion a year ago and analyst expectations of $1.55 billion.
For the year, IBM shares are down 6%, compared with a 1% decline by the Dow Jones Industrial Average DJIA, -1.43%, and versus a 6% rise by the S&P 500 index SPX, -1.63% and a 28% gain by the Nasdaq Composite Index COMP, -1.65%.