IBM's Profit Slides As Hardware Sales Keep Falling

International Business Machines Corp. reported a fall in first-quarter profit as the computing giant's revenue continued to be stung by a sharp decline in hardware sales.

Revenue slipped to $22.48 billion, below the $22.91 billion projected by analysts polled by Thomson Reuters. It was the eighth straight quarter IBM has reported weaker revenue from year-earlier levels.

Though the computing and tech giant remains a key provider of computer hardware, software and services to big corporations and governments around the world, IBM is struggling to respond to technological advances such as cloud computing, which allows customers to rent computing power and software over the Internet. Slowing demand in emerging markets, especially China, is also posing a challenge for Big Blue.

Revenue in IBM's systems-and-technology unit, which includes its hardware business, slid 23% in the first quarter. The unit has now posted year-over-year revenue declines for 10 straight quarters.

The trend has forced Chief Executive Virginia Rometty to find new businesses, such as data analytics and cloud computing. However, in her annual letter to IBM shareholders earlier this year, Ms. Rometty also noted that the company isn't exiting hardware and vowed to turnaround the troubled segment.

IBM reported a profit of $2.38 billion, or $2.29 a share, compared with $3.03 billion, or $2.70 a share, a year earlier. Operating earnings, which exclude retirement-plan costs and other items, fell to $2.54 a share from $3. Analysts expected operating earnings of $2.54 a share.

Gross margin widened to 46.9%, up 1.3 points.

Write to Anna Prior at [e-mail]

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