IBM Gives Disappointing Forecast -- 2nd Update

By Maria Armental 

International Business Machines Corp. on Tuesday gave a disappointing forecast for the year as it reported another period of sharply lower profit and revenue to end 2014.

The struggling technology giant, which said in October that it was abandoning its long-held target of making at least $20 a share by 2015, forecast earnings for 2015 of $15.75 to $16.50 a share, below the $16.51 estimated by Wall Street.

The disappointing outlook sent shares down 3.5% after hours.

The fourth quarter marked the 11th consecutive period the Armonk, N.Y, company failed to generate a year-over-year revenue increase. Its profit excluding one-time items easily beat expectations, however.

The company behind punched cards, floppy disks and the Jeopardy-winning computer system Watson traces its roots to 1911, when New York financier Charles Flint merged three manufacturing companies, creating the Computing-Tabulating-Recording Company. In time, the company moved away from its computing-scale and time-clock businesses, focusing on tabulating machines for business use. The company was renamed IBM in 1924.

To improve profitability, IBM exited low-margin businesses, selling, for example, its commodity server business to Lenovo Group Ltd. and transferring its semiconductor unit to Globalfoundries Inc.

In its latest reinvention bid, IBM is shifting to cloud computing and software and so-called big-data analytics. Its latest bet: the z13, a refrigerator-sized mainframe designed to handle exponential mobile transaction volumes.

On Tuesday, IBM said revenue from its global technology services segment fell 7.6% from the year-earlier period ti $9.17 billion, while the global business service segment logged an 8.4% drop to $4.35 billion. Software revenue, meanwhile, fell 6.9% to $7.58 billion. Systems and technology, which includes the company's computers, posted a 39% decrease to $2.41 billion.

Overall, IBM reported earnings of $5.48 billion, or $5.51 a share, down from $6.19 billion, or $5.73 a share, a year earlier. Excluding acquisition- and retirement-related costs, profit from continuing operations was $5.81 a share.

Total revenue fell to $24.11 billion.

Analysts had expected $5.41 a share on $24.77 billion in revenue.

Write to Maria Armental at [e-mail]

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