IBM loses quarterly sales estimates, shares fall

(Reuters) – International Business Machines Corp missed Wall Street estimates for quarterly revenue on Thursday, penalized by a rare drop in sales in its software unit due to customer distancing from longer-term deals due to pandemic-induced economic uncertainty.

The 109-year-old company is preparing to split into two corporations, with the company of the same name strengthening its focus on the so-called hybrid cloud, where it sees a $ 1 trillion market opportunity.

IBM surpassed profit estimates in the wake of strong growth in its cloud business and said it was confident of returning to sales growth in 2021.

That wasn’t enough to convince traders, however, as the company’s shares fell nearly 4% after the bell after IBM’s fourth consecutive quarter of declining sales.

“Clients are opting for shorter-term contracts, which has an impact on the average size of contract revenues,” Chief Financial Officer James Kavanaugh told Reuters.

“Given the economic uncertainty, customers are trying to understand their business and their business volumes over a long period of time.”

Kavanaugh noted that the momentum in its cloud business and a weaker dollar make the company confident of returning to sales growth.

Income from IBM’s cloud computing business increased 10% to a record $ 7.5 billion during the fourth quarter.

Total revenues fell 6.5% to $ 20.37 billion, missing analysts’ average estimate of $ 20.67 billion, according to IBES data. from Refinitiv. Excluding the impact from sales of currency and assets, revenues decreased by 8%.

Excluding the articles, the company earned $ 2.07 per share, over estimates of $ 1.79.

Munsif Vengattil’s reportage in Bengaluru; Editing by Devika Syamnath