IBM quarterly revenue misses on weak mainframe computer business

International Business Machines Corp reported a bigger-than-expected drop in first-quarter revenue on Tuesday, hurt by tapering demand for its mainframe computers and a stronger dollar, sending its shares down about 3 percent. The technology giant`s revenue at all its main business units except cloud, which has been the centrepiece of its turnaround strategy, missed analysts` estimates.

IBM`s cloud and cognitive segment, which includes analytics, cybersecurity and artificial intelligence, fell 1.5 percent to $5.04 billion in the quarter, but beat FactSet estimates of $4.18 billion. "We saw good acceleration in our cloud business... We now have an improving trajectory as we move forward," Chief Financial Officer Jim Kavanaugh said.

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Under Ginni Rometty`s stewardship, the company has shed many of its traditional hardware businesses and beefed up the growth areas through deals such as its $34 billion acquisition for Red Hat Inc. IBM returned to annual revenue growth in the last quarter of 2018, triggering expectations that its strategy was taking roots.

The company`s systems segment, which houses its mainframe computer business, fell 11.5 percent to $1.33 billion in the reported quarter, missing FactSet estimates of $1.37 billion. Its overall revenue slipped 4.7 percent to $18.18 billion in the first quarter ended March 31 and missed the average analyst estimate of $18.46 billion, according to IBES data from Refinitiv.

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Its net income fell to $1.59 billion, or $1.78 per share, in the quarter ended March 31 from $1.68 billion, or $1.81 per share, a year earlier. Excluding special items, the company earned $2.25 per share and beat analysts` expectation of $2.22 per share.

The company on Tuesday maintained its adjusted operating profit for 2019 to be "at least" $13.90 per share. Analysts on an average were expecting $13.91 per share.