IBM Profit Up, But Shares Fall After Revenue Misses Street

(RTTNews) - International Business Machines Corp. (IBM) Monday reported an increase in profit for the third quarter profit, reflecting the absence of a hefty charges from last year related to IBM's former chip operations.

However, the company's revenues for the third quarter fell 14 percent from last year, hurt largely by sharp drop in hardware sales and strong US dollar. The company's quarterly earnings came in above analysts' expectations, but its revenues fell short of expectations, sending its shares down a near 5 percent in the extended trading hours.

IBM's third-quarter revenues declined 14 percent to $19.28 billion from $22.4 billion last year. Excluding currency fluctuations and divested businesses, revenue fell 1 percent. This marks the 14th straight quarter the company has reported lower revenues.

Analysts polled by Thomson Reuters expected revenues of $19.62 billion for the quarter.

The stronger U.S. dollar impacted revenues by 9 percentage points.

IBM is divesting off its low-margin and unprofitable hardware businesses to improve profitability. The company is now striving hard to make IBM a company that provides cloud computing and data analytics.

"In the third quarter we again made progress in the transformation of our business to higher value, with strong growth in our strategic imperatives and expanded operating margins," said CEO Ginni Rometty.

Armonk, New York-based IBM's third-quarter profit rose to $2.95 billion or $3.01 per share from $18 million or $0.02 per share last year. Last year results included pretax charges of $4.7 billion related to IBM's former chip operations Microelectronics, which was sold to Globalfoundries, an investment arm of the government of Abu Dhabi.

Excluding one-time items, earnings from continuing operations fell to $3.34 per share from $3.68 per share. Analysts had a consensus earnings estimate of $3.30 per share for the quarter.

IBM now expects full-year 2015 earnings adjusted earnings of $14.75 to $15.75 per share, down from previous estimate of $15.75 to $16.50 per share. Analysts currently estimate earnings of $15.68 per share.

IBM closed Monday's trading at $149.22, down $1.17 or 0.78%, on the NYSE. The stock further dropped $7.21 or 4.83% in the after-hours trading.