IBM Misses Q1 Estimates, Shares Fall in Afterhours Trading
Although it is not usual for International Business Machines Corp. (NYSE: IBM) to miss earnings expectation, the devaluation of the yen and failure to close some lucrative deals both in the U.S. and Europe weighed on Company’s financials in the fiscal first quarter.
Commenting over the weaker-than-expected earnings, IBM’s Chief Financial Officer Mark Loughridge held responsible company’s poor sales execution strategy. Loughridge said that company failed in closing number of potential deals and pointed out that Easter Holiday towards the end of March also put pressure on the top line. IBM said about $400 million worth deals which were originally expected to close in the first quarter have now been moved to the fiscal second quarter.
Addressing analysts during earnings call, Loughridge said uncertainty still surrounds over the impact of sequestration, a series of automatic spending cuts. Sequester came into effect from March 1 as the lawmakers in Washington failed to reconcile over their respective stands.
“It’s hard to measure. I can tell you that our U.S. federal business was down 13 percent, which was certainly a drag on the U.S. performance,” added Loughridge.
For the fiscal first quarter, IBM reported adjusted earnings of $3.4 billion or $3.0 a share, missing analysts’ consensus estimate by 5 cents a share, according to a data compiled by Thomson Reuters. This was the first occasion in past 9 quarters where IBM missed Street’s estimate.
Revenue during the quarter contracted 5% to $23.4 billion (excluding the impact of foreign exchange fluctuations, revenue dropped 3%). Analysts’ consensus forecast was for $24.6 billion.
For the fiscal second quarter, IBM is expecting earnings to come more or less in the range of the first quarter’s earnings. Analysts were expecting it at $3.95 a share. However, the Company expects EPS will show an improvement in the second half of the current fiscal.
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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.
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