IBM's Q1 results pummeled by weak hardware sales

(Photo: Wikipedia)IBM's Watson artificial intelligence computer

US multinational technology and consulting corporation IBM said hardware sales fell 23 percent to $2.4 billion in the first quarter, helping bring down the company's total sales for the period.

Sales stood at $22.5 billion, about two percent lower on-year after adjusting for currency effects. Profit on a per-share basis fell on-year by some 15 percent to $2.54.

Sales in IBM's Systems and Technology business unit, which includes most hardware sales, have fallen for more than two years. Sales of IBM's System Z mainframe fell 40 percent.

Cloud revenue, however, grew by 50 percent. IBM said the public cloud portion of this business remains on track to hit $2.3 billion by the end of this year. During the quarter, IBM made big investments in the cloud and on its Watson cognitive computing business.

It plans to spend $1.2 billion to increase the number of data centers for its SoftLayer cloud computing service. It also revealed plans to invest some $1 billion in companies building applications and services on its Watson platform.

IBM raised its guidance for the full year. It expects to report per-share profits of at least $18 compared to the current consensus for the year of $17.84.

Analysts noted that the first quarter is always seasonally weaker while the fourth is always the strongest. Historically, delivers about 18 percent of its annual earnings in the first quarter and from 36 or 37 percent in the fourth quarter.

In January, IBM announced plans to sell off its low-end server business to China's Lenovo for $2.3 billion. It also explored but did not announce the sale of its software-defined networking assets.

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