WASHINGTON: International Business Machines Corp’s software business grew less than expected in the second quarter, sparking a sell-off in the company’s stock, even as its revenue beat forecasts.
The company’s software business revenue grew 1 percent to $6.5 billion, slower than estimates of 3 percent, as it signed fewer contracts than expected.
“We expect acceleration of software revenue to mid-single digits in second half of 2014,” said IBM Chief Financial Officer Martin Schroeter on a conference call after the results were released on Thursday.
IBM, the world’s largest technology company, has been attempting to restructure its business to focus on high-end products like cloud, mobile security and big data.
The company estimates that software will bring in half of its profits by 2015.
“Software is a big business no question, but 1 percent growth in what many have thought of as their key growth driver is worrisome,”Scott Kessler an analyst at S&P Capital said.
IBM shares fell 1.6 percent to $189.45 after closing at $192.49. Revenue in Asia and the Pacific fell 9 percent, with significant declines outside Japan, and improvements in Europe, Africa and the Middle East.
Revenue in China was down 11 percent, an improvement from past quarters.
Revenue fell 2 percent to $24.4 billion in the second quarter, above analysts’ average estimate of $24.1 billion.
Net profit rose to $4.1 billion, or $4.12 per share, from $3.2 billion, or $2.91 per share, a year earlier.
On an adjusted basis, the company earned $4.32 per share, beating analysts’ average estimate of $4.29.
Hardware revenue fell 11 percent to $3.3 billion, the seventh double digit decline in the past eight quarters. The companys global technology services fell 1.7 percent to 9.6 billion.
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