BRIC trouble causes headache for IBM as it misses on sales

Vendor insists it will achieve its full-year expectations despite global revenue sliding four per cent

IBM has vowed to improve its execution in growth markets after emerging countries dragged its global revenue down, leading it to miss Wall Street expectations.

For the three months to 30 September, Big Blue's sales hit $23.7bn (£14.8bn), down four per cent annually (two per cent factoring in currency adjustments) and trailing Wall Street expectations of $24.74bn. The firm's Q3 net income jumped six per cent to $4bn over the same period.

Revenue in the Americas and EMEA remained relatively flat – declining one per cent and rising one per cent annually respectively – but in the Asia-Pacific region, sales dropped year-on-year by 15 per cent (four per cent with currency adjustments).

Its sales in emerging countries Brazil, Russia, India and China were also down 15 per cent annually.

Mark Loughridge, IBM's chief financial officer, said on an earnings call transcribed by Seeking Alpha that emerging markets disappointed for the first time.

"Our performance in growth markets has historically outpaced major markets by eight to 10 points. But this quarter for the first time the growth market trailed the majors," he said.

The firm put the poor growth-market performance jointly down to a pause in China's economic development and its own execution in the regions, and IBM chief executive Ginni Rommetty added a vow to improve execution in its growth markets.

BM's hardware Systems and Technology Group saw sales plummet 17 per cent to $3.2bn in Q3 (16 per cent with currency adjustments), while its Software division's revenue crept up one per cent annually to $5.8bn.

Its Global Technology Services segment's sales dropped four per cent annually to $9.5bn, and for the first time ever it delivered more than $1bn in cloud revenue in one quarter, nearly half of which was delivered as a service.

Rommetty added that her company's commitment to new tech trends is paying off, and that she is confident this will see IBM meet its annual forecast.

"Where we had identified high-growth opportunities and pursued them aggressively – cloud, mobile, business analytics, and security – we continued to show strong growth," she said. "This underscores our strategy to continuously transform the company to high value.

"We are taking action to improve execution in our growth markets unit and in the elements of our hardware businesses that are underperforming. Given these actions, our strategic initiatives and the strength of our model, we are maintaining our view for the full year."