Big Blue startled the cocaine nose jobs of Wall Street by reporting a four percent drop in third quarter revenue.
IBM shares fell six percent in after-hours trade to $175.56 as Wall Street inflicted its revenge for proving its predictions on Big Blue profits wrong.
Chief Financial Officer Mark Loughridge said that third quarters tended to be tricky but added the company faced some “particular challenges” this year.
As you might expect, profits in its hardware business suffered and declined by $1 billion and currency effects had a $500 million year-to-year negative impact, Loughridge said.
Loughridge pointed out that there was less demand for hardware as software replaces traditional infrastructure, which was one of the reasons that Big Blue was shifting to become a more software focused business.
Chinese hardware sales were hit. China represents five percent of IBM’s business and 40 percent of that was hardware related.
There was not much IBM could have done about that. China’s growth has slowed this year, impacting corporate and public spending as the country develops an economic reform plan.
He said that China sales were expected to be down for another couple of quarters.
Revenue dropped four percent to $23.7 billion, below Wall Street analysts’ expectations of $24.74 billion.
Quarterly net income rose six percent to $4.0 billion which was better than expected.
However, it was the revenue drop which had Wall Street spitting tacks.