How IBM Is Continuing to Disappoint Investors

By Chris Lange Updated Apr 27, 11:13PM EDT · Published Oct 19, 4:34PM EDT

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International Business Machines Corp. (NYSE: IBM) reported its third quarter financial results after the markets closed on Monday. Despite beating on the bottom-line IBM continued to disappoint investors as the result of erosion and stagnation in its core IT-services operations. Not to mention, earnings and revenue growth was non-existent this quarter.

Big Blue had $3.34 in earnings per share (EPS) on $19.3 billion in revenue compared to consensus estimates from Thomson Reuters that call for $3.30 in EPS on $19.62 billion in revenue. The same period from the previous year had $3.68 in EPS on $22.40 billion in revenue.

The company expects to report full-year earnings in the range of $14.75 to $15.75 a share compared to consensus estimates that call for $15.68 in EPS.

In the earnings report, IBM detailed its segment results as:

Global Technology Services fell 10.2% to $7.94 billion in revenue with a gross margin of 38.1%.
Global Business Services fell 13.1% to $4.21 billion in revenue with a gross margin of 29.7%.
Software fell 10% to $5.14 billion in revenue with a gross margin of 86.4%.
Systems Hardware fell 38.7% to $1.49 billion in revenue with a gross margin of 44.7%.
Global Financing fell 8.1% to $447 million in revenue with a gross margin of 48.4%.

Virginia Rometty, IBM chairman, President and CEO, commented on the earnings:

In the third quarter we again made progress in the transformation of our business to higher value, with strong growth in our strategic imperatives and expanded operating margins. We are continuing to make significant investments to build platforms around analytics, cloud, mobility and security that lay the foundation for a new era of cognitive business — where we see long-term value for our clients and shareholders.

On the books, the company had cash, equivalents, and marketable securities that totaled $9.57 billion compared to $8.48 at the end of December 2014.

Shares of Big Blue closed Monday down 0.8% at $149.22, with a consensus analyst price target of $157.32 and a 52-week trading range of $140.56 to $176.30. Following the release of the earnings report shares were down about 4% at $143.49 in the after-hours trading session.

About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.