IBM Corp posted a revenue drop that was bigger than had been expected Tuesday, as it was hit by slowing sales for software and less demand for its mainframe servers, which points to a tough recovery for the giant of technology services that is going through a big turnaround.
CEO Ginni Rometty has focused the company toward the fast-growing analytics and cloud services to lessen the company dependence on the traditional hardware products it has and reverse several years of declines in revenue.
The company, based in Armonk, New York posted overall revenue that fell 2% during its third quarter with nearly all its businesses falling short of revenue estimates on Wall Street.
Revenue at the systems unit, which has data storage systems and mainframe servers sold to big organizations was up just 1% compared to a jump of 25% during the previous quarter.
Growth in sales of its z14 mainframe servers, which were introduced one year ago, slowed as customers have awaited the launch of new units before upgrading.
The cognitive software business for IBM that houses analytics, cybersecurity services and Watson the AI platform, saw its sales fall 6% to $4.15 billion.
Seasonal factors such as demand for software like transactional processing platforms slowed revenue, said IBM CFO James Kavanaugh.
IBM, which receives 60% of its overall revenue from outside the U.S. said that a stronger U.S. dollar weighed down results.
The company added that it made revenue of $39.5 billion during the past 12 months from strategic imperatives such as high-growth businesses that include cloud services that are spread amongst several divisions.
Overall revenue was down to $18.75 billion missing estimates by Wall Street averaging $19.10 billion.
Net income was down from $2.73 billion in the same period one year ago to $2.69 billion. Earnings per share were up from $2.92 to $2.94 due to fewer outstanding shares overall.
IBM shares fell 4.7% in extended trading, and the Dow component has fallen by 8% in 2018.