IBM Shares Fall on Guidance That Disappoints

Shares of IBM were down over 6% after the company posted earnings that were better than had been expected on Tuesday for the first quarter.

IBM posted per share earnings of $2.45 while analysts were expecting per share earnings of $2.42. Revenue ended the quarter at $19.1 billion while analysts were expecting $18.84 billion.

IBM last quarter announced growth in revenue from the same quarter last year for the first time in over five years and that streak continues for the second straight quarter.

However, in a prepared statement released by the company it reaffirmed its guidance previously of a minimum of $13.80 in per share earnings, excluding special items, for its 2018 full year, while Wall Street was expecting $13.82 a share.

Analysts said last Friday that they expected IBM to post gains from businesses that upgraded to the latest IBM mainframe computers known as z14. The product was pushed by IBM as a driver of growth for its Systems business in the company’s Tuesday statement.

However, revenue from Systems was dragged down by a drop in revenue from storage, said IBM’s CFO James Kavanaugh, who said it contributed to a slight shortfall in our expectations of revenue growth at IBM.

However, Kavanaugh said that looking forward the company has confidence that it can bring the storage business back to where it had to be during the second six months of 2018.

IBM is continuing to search out growth from strategic imperatives that include mobile, social, cloud and analytics.

During the fourth quarter the group contributed over 49% of all company revenue and that balance was expected to be the same for the first quarter, but strategic imperatives ended up being below that at 47% of all IBM revenue. IBM’s cloud revenue was $4.2 billion, which represented an increase of 20%.

Growth from its strategic imperative division increased 15% compared to the same period one year, which was down from its 17% growth compared to the year earlier during the fourth quarter.

Technology Services and Cloud Platforms, the overall largest business segment at IBM generated more than $8.62 billion worth of revenue, beating analyst’s estimates that averaged $8.28 billion.

Its Global Business Services and Cognitive Solutions segments both exceeded analyst expectations with Global Business Services generating $4.3 billion and Cognitive Solutions $4.2 billion.