IBM surprises shareholders with declining sales over the past quarter

IBM, to everyone’s surprise, saw its sales fall over the past quarter. The company’s shares depreciated by more than four percent immediately after the company announced its second fiscal quarter results. Strikingly, the company missed its expectations in just about every category.

For three quarters, IBM saw its turnover grow. But last quarter, it fell by two percent to $18.76 billion. That’s less than a year ago, when the company made $19.15 billion. Analysts had expected the company to have a turnover of $19.1 billion. According to IBM, the decline in turnover was due to exchange rates, but analysts had already taken this into account.

Disappointing results

IBM divides its turnover into product categories. Interestingly enough, it achieved revenue growth in only a few areas. In the area of Cognitive Solutions, the company saw its turnover decline by five percent to $4.15 billion. That’s less than expected: analysts had expected $4.3 billion.

This is striking, because this division includes not only IBM’s analytical services, but also the Watson platform. Chief Financial Officer James J. Kavanaugh attributes the reduction in weaknesses in areas such as collaboration, commerce and talent management. The news is also disappointing, because IBM sees analytics and big data as essential for its future. At the same time, there is something to be said about the decline in turnover; the markets have yet to be formed. Demand for the solutions offered by IBM is therefore likely to grow.

Technology Services & Cloud Platforms, which accounts for half of IBM’s turnover, shrank by two percent to just under 8.3 billion dollars. Analysts had expected sales of $8.43 billion. There was also slight growth in the Global Business Services and Systems sector. However, the objectives were also missed here.

Better by itself

It’s not all doom and gloom. Earnings per share amounted to 3.42 dollars, compared to an expected 3.40 dollars. The company’s margins thus grew, with which shareholders could still be satisfied. IBM also saw its cloud sales grow across the board compared to a year ago. IBM claims to have seen its turnover grow by 19 billion dollars over the whole year, a growth of 20 percent.

As IBM saw its sales decline over the past quarter, shareholders feared that the company would fall back into an old pattern. IBM saw its turnover fall for 22 consecutive quarters. The last three quarters have been better, up to this quarter. But according to Kavanaugh, the most important thing is that IBM is completely transformed. For example, the company responded to weaker performing software applications by modernising and providing them with AI.