IBM on Tuesday blamed poor execution in parts of its business and signs of a slowdown in demand from large enterprise customers for a negligible 1 per cent underlying growth in its revenues in the latest quarter.
But the US technology giant hit earnings forecasts as it continued to reap benefits from its recent productivity improvements, prompting its shares in after-market trading to regain some of its recent losses.
Mark Loughbridge, chief financial officer, said that while demand from small and medium-sized customers remained solid, the large companies and government customers that make up the core of IBM’s customer base had become more cautious in the final month of the second quarter.
The IBM executive also said that shortages of some of its servers had meant the company could not meet demand from some customers, and that a product transition to more profitable machines was “taking longer than anticipated.” He also pointed to execution problems in parts of the IBM’s services division, which had turned in good results in the US but “underperformed in some key countries in Europe and Asia.”
Wall Street’s latest concerns have focused in particular on the fall-off in new contract signings in the services division, particularly for long-term assignments.
In the second quarter, IBM said it had signed $9.6bn worth of new contracts, down from $14.6bn in the same period a year ago and the $11bn that analysts had been expecting.
While pointing out that last year’s performance was unusually strong and long-term signings tended to be uneven, Mr Loughbridge added: “I would certainly have to admit that signings performance did not meet our expectations.”
Overall revenues of $21.9bn were 2 per cent lower than a year ago, though excluding the PC disposal underlying revenues edged up 1 per cent, IBM said. Net income climbed 11 per cent to $2bn.