IBM Shares Fall After Forecasting Slowdown

The International Business Machines Corp. (NYSE:IBM), the information technology giant saw its shares fall by about 5 percent after the third quarter results failed to impress the investors.

IBM has until now performed very well and when compared to its previous track record, the Q3 results reported were a bit disappointing and it also created worries about a slowdown in the technology spending. International Business Machines has increased its profit outlook for this year, but the increase is not par with those of other technology corporations like Oracle Corp. (NASDAQ:ORCL) and Accenture Plc. (NYSE:ACN) which again did not fulfill the high expectations of the investors. The company’s various businesses has not performed up to the expectations of the analysts, investors and the new deals  made by the company’s global services businesses also showed the same result by failing to meet the expectations of the Wall Street. The company has to focus on signing new strong deals in the present quarter in order to set things right and pacify the investors.

The global economic slowdown and looming uncertainty in the macroeconomic environment has made he customers defer new projects. The scenario may worsen and become more evident next year. but still, the company’s trends show it at the positive side of the spectrum in the overall technology sector.  According to IBM, the company’s total services signings has shown an increase and climbed to about $ 12.3 million for the third quarter as expected and it serves as an indicator for the company’s growth in the future.

IBM’s shares continue to outperform the rest even when the market slows down as its recurring revenue prevents it from hitting a low during the slowdown. The Company’s growth rates in America, Europe and Asia regions are all decelerating gradually as the public sector growth has almost come to a standstill.

The worsening financial crisis in the European Union al0ong with the slowdown in the United States economy has acted as a dampener by reducing the consumer demand for hardware and software supplied by companies like IBM. Government spending and financial services industry are the major revenue generating sectors for IBM and currently both are hit hard by the economic crisis.

On the positive side, the revenues from IBM’s cloud computing has garnered twice as much as what it made in the previous year within 3 quarters. The adjusted revenue from America has increased by 6 percent, Asia by 1 percent where as Africa, Europe and the Middle East has remained flat.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.