International Business Machines Corp. (NYSE: IBM) reported late on Wednesday that its fiscal second-quarter net income fell 17% as restructuring expenses (charges related to job cuts) and softness in hardware and software sales put pressure on the bottom line.
“In the first half, we’ve had strength in Latin America and the Middle East and Africa region, but declines in some of our larger markets like China and Australia have impacted the overall performance,” said Chief Financial Officer Mark Loughridge while speaking with analysts in a conference call.
Shares of IBM Corp, however, gained in afterhours trading as the company’s earnings edged past Street’s expectation. The world’s largest enterprise software and hardware solutions provider also lifted full-year guidance.
IBM Corp has been under immense pressure, lately. Its previous quarterly results (first quarter) marked first occasion when its revenue and earnings missed Wall Street’s estimates in last eight years. At that moment, IBM attributed this to its failure to close some deals and the depreciation of yen.
In previous weeks, a number of brokerages have slashed their price targets on the stock, citing concerns over revenue growth. IBM’s peers such as Accenture and Oracle have also posted weak quarterly results in the recent past.
Just last week, Goldman Sachs downgraded the stock to “neutral” from “buy”, citing that the company is now increasingly dependent on emerging economies and sustainable uptrend in earnings was now difficult to maintain.
For the fiscal second quarter, IBM Corp reported adjusted/non-GAAP earnings of $3.91 a share compared to $3.51 a share, in the same quarter of last fiscal year.
Revenue fell 3% to $24.9 billion, in the recently concluded quarter from $25.78 billion, in the year-earlier quarter.
Analysts surveyed by Thomson Reuters had forecasted earnings of $3.77 a share on revenue of $25.37 billion. Analysts’ estimate typically excludes onetime items.
For the full-fiscal year, IBM now expects non-GAAP earnings of at least $16.90 a share up from its previous guidance of $16.70 a share. (Non-GAAP earnings excluded $1 billion restructuring charges linked to job cuts).
The Company pointed that the “substantial second half gains”, projected in its earlier guidance, were unlikely to be achieved by the end of 2013.
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