This post was originally published on this site
International Business Machines Corp. revealed Monday that revenue returned to a decline in the first quarter amid the spread of COVID-19, even as Red Hat sales boosted its cloud business, and said it was pulling its annual forecast for now.
The company reported first-quarter net income of $1.18 billion, or $1.31 a share, compared with $1.59 billion, or $1.78 a share, in the year-ago period. Adjusted earnings were $1.84 a share, down from $2.25 a share a year ago. Revenue declined to $17.57 billion from $18.18 billion in the year-ago quarter. Analysts surveyed by FactSet had forecast adjusted earnings of $1.81 a share on revenue of $17.59 billion on average.
The decline in revenue returns Big Blue to a losing streak it briefly snapped when it barely managed to eke out a slight rise in sales in the fourth quarter. IBM’s sales have declined year-over-year in all but four of the past 32 quarters.
IBM IBM, +0.24% shares slipped 1% in after-hours activity, after gaining 0.4% to close the regular session at $120.58. For the year, IBM shares are down about 10%, while the Dow Jones Industrial Average DJIA, -2.44% — which counts IBM as a component — is off 17%, the S&P 500 index SPX, -1.78% is down 12%, and the tech-heavy Nasdaq Composite Index COMP, -1.03% is down 4%.
IBM hopes that the addition of Red Hat’s software offerings and other changes can reinvigorate its business. Arvind Krishna started as IBM’s new chief executive earlier this month, after the company announced at the end of January that Ginny Rometty was stepping down.
“IBM remains focused on helping our clients adapt to the immediate challenges of the COVID-19 pandemic, while we continue to enable them to shift their mission-critical workloads to hybrid cloud and expand their use of AI to help transform their operations,” said Krishna in a statement.
The company, however, said it was pulling its guidance for the year because of COVID-19. In January, the company had forecast adjusted earnings of “at least” $13.35 a share for 2020, while analysts expect $12.01 a share. “The company will reassess this position based on the clarity of the macroeconomic recovery at the end of the second quarter,” IBM said in a statement
Cloud and cognitive software sales, which includes IBM’s Red Hat business, came in at $5.24 billion, while analysts had forecast a 5% rise to $5.3 billion. IBM said that Red Hat accounted for $1.1 billion in revenue, up 20% from a year ago, but that it was only allowed to report $719 million because of purchase accounting requirements.
Systems revenue, which includes mainframes, was $1.37 billion versus the $1.42 billion Street view.
Global technology services revenue came in at $6.47 billion while the Street expected $6.51 billion, and global business services revenue accounted for $4.14 billion in sales while the Street had forecast $3.91 billion.
Of the 19 analysts that cover IBM, five have overweight or buy ratings, 12 have hold ratings, and two have sell ratings, along with an average price target of $132.28.
