IBM Corp.'s first-quarter net income and revenue declined due to delays in closing several of the technology company's large software and mainframe computer deals. The results fell short of Wall Street's expectations, sending IBM's stock lower in after-hours trading.
IBM is seen as a good gauge of technology demand because it sells to major companies and governments around the world. That said, it's not immune to economic uncertainty and currency fluctuations, which were evident in the quarterly results.
IBM said Thursday that it earned $3.03 billion, or $2.70 per share, in the January-March period. That's down 1 percent from $3.07 billion, or $2.61 per share, in the same period a year earlier. Last year's quarter had more outstanding shares, which lowers per-share results.
Earnings excluding one-time items were $3 per share in the latest quarter, below Wall Street's expectations of $3.05 per share.
Revenue fell 5 percent, to $23.41 billion from $24.67 billion. Analysts polled by FactSet expected revenue to be nearly unchanged at $24.65 billion
"Despite a solid start and good client demand we did not close a number of software and mainframe transactions that have moved into the second quarter," said IBM CEO Ginni Rometty in a statement. "The services business performed as expected with strong profit growth and significant new business in the quarter."
Chief Financial Officer Mark Loughridge said on a conference call that weakness in the Japanese yen hurt earnings. A weak yen translates to fewer dollars for IBM on sales in Japan. Adjusted for currency fluctuations, IBM said its revenue would have only declined by 3 percent for the quarter, rather than 5 percent.
IBM kept its full-year guidance intact. It still expects adjusted, per-share earnings of at least $16.70 for 2013. Analysts predict $16.77. Rometty said the company expects to close the delayed transactions and expects to benefit from investments in growth initiatives. She said IBM is also trying to improve the weaker parts of its business.
The company has been focusing on growing its software business, which is more profitable, over hardware.
Revenue from technology services declined 4 percent during the quarter, to $9.6 billion, and business services revenue fell 3 percent, to $4.5 billion. Software revenue was flat at $5.6 billion, while hardware revenue dropped 17 percent to $3.1 billion.
IBM has had a good track record of beating or at least meeting Wall Street's expectations —the shortfall in profit and revenue is a rare miss.
The company has now been able to grow its earnings per share for 41 consecutive quarters — more than a decade — even though it hasn't always increased net income. In the third quarter of 2012 IBM's net income was flat, while per-share earnings grew because the company had fewer outstanding shares. That's what happened in the first quarter. Net income fell but per-share earnings increased.
Shares of the Armonk, N.Y.-based company fell $9.90, or 4.8 percent, to $197.25 in after-hours trading. Before the earnings announcement, the stock closed down $2.52 at $207.15.
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