Big Blue still blue and seeing dark clouds

Clouds over the Old Power Station, OxfordDespite all its restructuring, IBM can’t pull itself out of trouble.

Yesterday Big Blue had a bigger than expected drop in revenue and cut its full year profit forecast.

It appears that the stronger US dollar had made IBM slump in demand from China and emerging markets much worse.

It is the 14th time in a row that Big Blue’s revenues have fallen. The outfit has sold off a lot of its low margin businesses but the more lucrative area of cloud computing has not paid off yet.

IBM’s China business was particularly hard hit, with fewer big deals causing revenue from that country to fall 17 percent, IBM’s chief financial officer said on a conference call with analysts. Sales in Brazil, Russia, India and China combined were down 30 percent.

The company gets more than half its business from overseas saw overall revenue from continuing operations was cut nine percent by a strong US dollar.

The company’s total revenue fell 13.9 percent to $19.28 billion in the quarter, below analysts’ average forecast of $19.62 billion.

Martin Schroeder IBM’s CFO said there were weakness in its consulting and storage businesses for the revenue shortfall, after taking currency moves and discontinued business into account.

“I would characterise it as the consulting and systems integration business moving away from these large, packaged applications and the storage business moving to flash and to the cloud,” Schroeter said.

Revenue from what the company calls “strategic imperatives,” which include cloud and mobile computing, data analytics, social and security software, rose about 17 percent in the third quarter ended September 30.

Yet the new businesses have so far failed to make up for revenue lost to divestitures.

IBM’s net income from continuing operations fell to $2.96 billion from $3.46 billion a year earlier.

Consolidated net income rose to $2.95 billion from $18 million last year. Last year profit was hurt by non-recurring pre-tax charge of $3.3 billion, net of tax, for discontinued operations.