Unexpected sales slowdown sends IBM shares tumbling on Wall Street

Click to follow

IBM, the world's largest computer company, issued a nasty surprise to investors last night, saying profits and revenues were considerably below expectations in the first quarter due to sluggish sales.

IBM, the world's largest computer company, issued a nasty surprise to investors last night, saying profits and revenues were considerably below expectations in the first quarter due to sluggish sales.

Bringing out its results after New York's stock market closed, and two days ahead of schedule, IBM reported a profit from continuing operations of $1.41bn (£750m), or 85 cents a share, compared with $1.36bn, or 79 cents a share, a year earlier. Analysts had expected profits of 90 cents a share.

Sam Palmisano, the chairman and chief executive of IBM, which is nicknamed Big Blue, said: "After a strong start, we had difficulty closing transactions in the final weeks of the quarter, especially in countries with soft economic conditions." IBM's stock dropped 4 per cent to a 20-month low in after-hours trading.

Hit by low-cost computer manufacturers in Asia, IBM has agreed to sell its laptop business to China's Lenovo. Analysts said sales of IBM's ThinkPads probably fell ahead of that sale.

Overall, revenues from continuing operations rose 3 per cent to $22.9bn from $22.2bn a year ago, well below Wall Street analysts' expectations.

Mr Palmisano is trying to reshape the New York company to focus on software and services such as consulting. It has spent more than $8bn buying 40 software companies in the past 10 years, in part because software profit margins are twice as high as IBM's computer and services businesses.

IBM issued its results amid a sea of bad news on Wall Street yesterday and fears that economic growth is slowing. Its shares have fallen 7 per cent in the first three months of the year. Its sales have trailed those of Hewlett-Packard, which has sacked its chief executive, Carly Fiorina, due to dissatisfaction with her ideas on how to grow the company.

Comments