Issues in the UK and Germany have "put pressure on growth" at IBM in Q1, during which revenue fell for the 20th quarter in a row, leading it to miss Wall Street expectations, prompting shares to slump by five per cent.
For the three months to 31 March, net profit at IBM fell 13 per cent annually to $1.8bn, on revenue which was down three per cent over the same period to $18.2bn - missing analysts' expectations of $18.4bn. IBM shares were trading at $170.05 per share before its results announcement, but fell as much as five per cent to around $160 per share soon after.
Although the company as a whole saw sales decline for the 20th quarter in a row, its strategic imperatives revenue grew 12 per cent annually to $7.8bn, and cloud revenue grew by a third to $3.5bn.
On an earnings call, IBM's CFO Martin Schroeter said the UK and Germany caused a headache for the firm.
"Currency was once again a headwind to growth, fairly consistent with the impact in the fourth quarter," he said, on an earnings call transcribed by Seeking Alpha. "At current spot rates, that headwind will be more substantial over the next couple of quarters. On a geographic basis, last quarter I talked about the impact of macro and geopolitical trends on some countries' performance. In Europe, much of this continued into the first quarter, with the clients in the UK and Germany, in particular, putting pressure on our growth."
IBM's Cognitive Solutions business was the only unit within the firm to grow in Q1, with sales up 2.1 per cent annually to $4.1bn, driven by analytics, security and Watson. Its Global Business Services revenue fell three per cent to $4bn, while its Technology Services and Cloud arm's revenue also dropped 2.5 per cent to $8.5bn. IBM's Systems unit suffered the biggest annual decline in sales - down 16.8 per cent to $1.4bn, and its Global Financing division slumped 1.2 per cent to $405m.
In a statement, IBM's CEO Ginni Rometty said the company is focusing on the right areas of the market.
"In the first quarter, both the IBM Cloud and our cognitive solutions again grew strongly, which fuelled robust performance in our strategic imperatives," she said. "In addition, we are developing and bringing to market emerging technologies such as blockchain and quantum, revolutionising how enterprises will tackle complex business problems in the years ahead."
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