IBM’s Q3 heightens caution, spurs sell-off
IBM, a bellwether for the IT hardware sector with its global span and diverse clientele, needed to beat forecasts significantly to ease investors’ concerns, analysts said.
International Business Machines Corp’s total services signings — an indicator of future growth — climbed to US$12.3 billion (RM38.41 billion) in the third quarter, at the low end of expectations of US$12 billion to US$13 billion.
Revenue rose 8 per cent to US$26.2 billion, marginally softer than an average forecast of US$26.26 billion.
IBM, which has consistently beaten Wall Street forecasts, raised its full-year diluted earnings forecast to at least US$13.35 per share, from its prior estimate of at least US$13.25. But that was just pennies above the Wall Street target of US$13.32, according to Thomson Reuters I/B/E/S.
“Whatever IBM could control, they did a great job. But they are not immune to macro conditions. Financial conditions are tough,” said Global Equities Research analyst Trip Chowdhry.
“People don’t want to cancel projects, but projects are getting delayed. Sales cycles are getting elongated. New projects are getting smaller budgets.”
Buttressed by recurring revenue that helps keep IBM’s results steady in strong and weak economies, the company’s shares have outperformed the broader market. They are up about 28 per cent this year versus the Standard & Poor’s 500 index’s 4 per cent dip.
Some analysts said yesterday’s showing, in barely meeting expectations, may have triggered profit-taking. Its stock fell 3.7 per cent to US$179.70 in extended trade after closing down 2.07 per cent on the New York Stock Exchange.
“The company exceeded published expectations, but the underlying expectations were even higher,” Annex Research analyst Bob Djurdjevic said. “Investors who have been very bullish on IBM are probably taking some profits now.”
US economic concerns and a worsening European financial crisis have hurt demand. But companies such as IBM that sell hardware and software for data centres powering the Internet have remained resilient.
IBM reported a third-quarter profit, excluding items, of US$3.28 per share, up 15 per cent year over year, just pennies above expectations for US$3.22. — Reuters