UK Edition
IBM shares slip as results cast doubt on growth plans
IBM shares slumped in extended trading last night, after investors were spooked by the company's disappointing revenue figures, which signalled growth in its new businesses may be faltering.
The 107-year-old company saw revenue slip 2pc to $18.8bn (£14.3bn) in the three months to the end of September, missing analyst expectations for $19.1bn.
Revenue growth in its cloud business slowed in the period, from 20pc in the second quarter to 10pc in the third, raising questions over whether this will continue to help drive gains in the future. The business continues to be smaller than the cloud divisions of both Amazon and Microsoft.
In what is thought to be one of its most promising businesses, "cognitive solutions", which includes its artificial intelligence platform Watson, revenue fell 6pc year-on-year to $4.15bn.
Chief financial officer Jim Kavanaugh blamed seasonal factors for the decline, saying fewer companies had switched their transaction processing systems to newer models during the three month period.
However, he said the company had "a good pipeline in transaction processing software as we enter the fourth quarter".
Ivan Feinseth, an analyst at Tigress Financial Partners, warned that IBM needed to shift away from its mainframe servers, which companies were casting aside, and really focus on newer technologies.
"They need their new key initiatives, such as the cloud and Watson AI development, to continue to ramp up," he said going into the results. "They are growing, but they are not moving the bigger needle and that’s the issue."
Shares declined around 4.5pc in extended trading, even as IBM said its turnaround remained on track.
Mr Kavanaugh said the company was ramping up into the fourth quarter in a number of its businesses. In services, for example, he said there was a "chance to exit the year with a very strong position".