IBM Reduces Guidance In Q3 Financial Report Amid Transformation To Cloud Era

IBM stressed that revenue from the "strategic imperatives" in which it is investing heavily continue to grow handsomely, with sales of cloud, analytics, security, social and mobile rising 27 per cent in Q3 adjusting for currency and divested business.

Rometty said IBM is focusing on cloud services, mobility, and data analytics, with its Jeopardy television game show-winning Watson artificial intelligence poised to differentiate the company from competitors. The difference is that IBM is much bigger, with nearly 380,000 employees and an existing business that still needs care and attention.

IBM's transformation has included selling off billions of dollars worth of businesses, such as its personal computer unit, that the United States company didn't see as part of it future. The other growing segment was Global Financing, whose revenue grew 7 percent year over year.

Profit in the third quarter, excludingamortization, acquisition-related charges and divested businesses, was $3.34 a share, compared with the $3.30 average estimate from analysts.

Another recent customer win Schroeter highlighted was a $1 billion outsourcing deal with Evry, a Norvegian IT services company. Depending on dividends and share buybacks is not a sustainable plan anymore for IBM. Europe, the Middle East, and Africa brought in $6.1bn, down 16 per cent. In Asia-Pacific, revenue was $4.1bn, down 19 per cent on the year-ago quarter. IBM recorded a 20 percent increase from sales of z Systems (the mainframes) and a 2 percent increase from sales of Power Systems (the high-end servers powered by Big Blue's Power processors), which was not enough to offset a 14-percent year-over-year drop in storage sales. IBM said adjusting for currency and divested business, revenue fell 1%.

Everyones going to be all eyes on how Watson is doing, how their cloud initiative is doing, Morgan said.

His company, which has $10.6 billion assets under management as of end of the third quarter, holds IBM stock.

Thomson ReutersA woman walks over a welcoming sign at the booth of IBM at the CeBIT trade fair in Hanover(Reuters) - Shares of global Business Machines Corp hit a five-year low on Tuesday, a day after the company's lackluster results and forecast showed that it would be a while before its focus on lucrative cloud computing business makes up for revenue lost to divestitures. It also forecast guidance for the year weaker than analysts expected as it transforms from its legacy hardware business to cloud, mobile and other "strategic imeratives".

The new group will be integrated into IBM's Watson Health platform, which sifts through vast amounts of research and medical data to help health professionals improve treatment.

IBM reported Earnings Per Share of $3.02 - down 9 percent year over year.

Revenues of $19.3bn for the three months to 30 September were down 14 per cent year on year, or one per cent adjusting for currency effects and the System x sale, as slow sales in its home U.S. market and the BRIC countries dragged on the top line.

Revenue in the hardware division fell 39 percent to $1.49 billion.